CORPORATE INFORMATION
A N N U A L M E E T I N G
A N N U A L M E E T I N G
The Annual Meeting of Littelfuse, Inc. will be held at
9:00 a.m. Central Time on April 27, 2018, at the O’Hare
Plaza First Floor Conference Center, 8745 West Higgins
Road, Chicago, IL 60631. Proxy materials and a copy
of this report will be mailed or made available via the
Internet in advance of the meeting to all shareholders
of record as of March 1, 2018.
C O M M O N S T O C K
C O M M O N S T O C K
Littelfuse, Inc. common stock is traded on the NASDAQ®
Global Select Market under the symbol LFUS.
S H A R E H O L D E R I N F O R M AT I O N
S H A R E H O L D E R I N F O R M AT I O N
In addition to annual reports to shareholders, copies of
the Company’s fi lings with the Securities and Exchange
Commission are available on the Investor Relations
section of our website at: investor.littelfuse.com.
I N D E P E N D E N T R E G I S T E R E D
I N D E P E N D E N T R E G I S T E R E D
P U B L I C A C C O U N T I N G F I R M
P U B L I C A C C O U N T I N G F I R M
Grant Thornton LLP
171 N. Clark Street
Suite 200
Chicago, IL 60601
T R A N S F E R A G E N T
T R A N S F E R A G E N T
EQ Shareowner Services
110 Centre Pointe Curve, Suite 101
Mendota Heights, MN 55110
1.800.468.9716
L I T T E L F U S E W O R L D H E A D Q U A R T E R S
L I T T E L F U S E W O R L D H E A D Q U A R T E R S
Littelfuse, Inc.
8755 West Higgins Road
Suite 500
Chicago, IL 60631
+1.773.628.1000
Littelfuse.com
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ANNUAL
REPORT
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© 2018 Littelfuse, Inc. | Form: CM105-EN
M I C H A E L P. R U T Z
Senior Vice President,
Global Operations
M AT T H E W J . C O L E
Senior Vice President and General
Manager, Industrial Business Unit
I A N H I G H L E Y
Senior Vice President and General
Manager, Semiconductor Products
and Chief Technology Offi cer
D E E PA K N AYA R
Senior Vice President and General
Manager, Electronics Business Unit
EXECUTIVE OFFICERS
DAV I D W. H E I N Z M A N N
President and Chief
Executive Offi cer
M E E N A L A . S E T H N A
Executive Vice President
and Chief Financial Offi cer
R YA N K . S TA F F O R D
Executive Vice President, Chief Legal
and Human Resources Offi cer and
Corporate Secretary
BOARD OF DIRECTORS
T Z A U - J I N C H U N G
Operating Partner
Core Industrial Partners LLC
J O H N E . M A J O R
President
MTSG
C A R Y T. F U
Co-Founder and
Retired Chairman
Benchmark Electronics, Inc.
A N T H O N Y G R I L L O
Founder
Ascribe Opportunities
Management, LLC
DAV I D W. H E I N Z M A N N
President and
Chief Executive Offi cer
Littelfuse, Inc.
G O R D O N H U N T E R
Chairman of the Board
Retired President and
Chief Executive Offi cer
Littelfuse, Inc.
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W I L L I A M P. N O G L OW S
Chairman of the Board
Cabot Microelectronics
Corporation
R O N A L D L . S C H U B E L
Retired Executive Vice President
and President of the Americas Region
Molex Incorporated
D R . N AT H A N Z O M M E R
Founder, former Chairman
and Chief Executive Offi cer
IXYS Corporation
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (“PSLRA”)
The statements contained in the letter to shareholders and the other sections of this report and in the Company’s Annual Report on Form
10-K that are not historical facts are intended to constitute “forward-looking statements” entitled to the safe-harbor provisions of the PSLRA.
These statements may involve risks and uncertainties, including, but not limited to, risks relating to product demand and market acceptance,
economic conditions, the impact of competitive products and pricing, product quality problems or product recalls, capacity and supply
diffi culties or constraints, coal mining exposures reserves, failure of an indemnifi cation for environmental liability, exchange rate fl uctuations,
commodity price fl uctuations, the effect of the company’s accounting policies, labor disputes, restructuring costs in excess of expectations,
pension plan asset returns less than assumed, integration of acquisitions, uncertainties related to political and regulatory changes and other
risks that may be detailed in “Item 1A, Risk Factors” in the Form 10-K and in the Company’s other Securities and Exchange Commission fi lings.
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DEAR SHAREHO LDERS,
OUR STRONG PERFORMANCE CO NTINUED IN 2017
In 2017, Littelfuse celebrated
its 90th anniversary and
another year of tremendous
success. Our outstanding
team of associates around
the world helped our
company achieve several
major accomplishments:
+ We achieved record sales,
adjusted diluted earnings per
share and operating cash fl ow.
+ We increased our investment in
Monolith Semiconductor and
launched our fi rst products with
silicon carbide, a promising
semiconductor material.
+ We acquired U.S. Sensor,
expanding our existing
sensor platform into
temperature sensors.
+ We announced the acquisition
of IXYS Corporation, the largest
in our company’s history, which
we expect to be a catalyst to
accelerate growth across our
power control platform.
1 Adjusted diluted EPS excludes acquisition related expenses,
restructuring, impairment and other charges and gains, as applicable.
A reconciliation of this non-GAAP fi nancial measure to the most
directly comparable fi nancial measure calculated and presented
in accordance with GAAP is set forth on page 6.
2 Calculated as cash from operating activities less capital expenditures.
Net sales in 2017 were $1.22 billion,
an increase of 16 percent compared
to 2016, with 7 percent organic
growth. The results were led by
strength in the Electronics and
Automotive segments. Electronics
sales increased 24 percent to $662
million, with strong growth across
most end markets. Automotive sales
of $453 million were up 9 percent,
driven by excellent performance in
our automotive fuse business and
our commercial vehicle products
business. Industrial sales increased
DAVE HEINZMANN
President and Chief
Executive Offi cer
1 percent to $106 million, with key industrial end markets showing
initial signs of improvement, which more than offset the impact of
the 2016 sale of our e-house business in Canada.
GAAP diluted EPS was $5.21. Adjusted diluted EPS was $7.741,
an increase of 24 percent vs. last year. Cash fl ow from operating
activities was a record $269 million, a 49 percent increase over
last year. Capital expenditures were $66 million, resulting in
record free cash fl ow2 of $203 million for the year, a growth of
52 percent. We continued to return capital to shareholders through
a 12 percent increase in our cash dividend rate. This was our
seventh consecutive year of double-digit dividend growth.
ADVANCING OUR STRATEGY
At the intersection of the global megatrends of safety, energy
effi ciency and the connected world, our strategy is built upon
three major areas of expertise that drive our business: protect,
control and sense. Working with our customers to provide
safer, more reliable and more effi cient connected products, our
strategic plan is to continue growing our circuit protection platform;
accelerate the growth of our power control platform; and double
the sales of our sensor platform. At our Analyst Day in December
2016, we launched our updated strategy and outlined our fi ve-year
roadmap with the following fi nancial targets:
+ Double-digit annual sales growth, with an increased organic
growth rate of 5–7% and an additional 5–7% growth from
strategic acquisitions;
+ Double-digit annual growth in earnings per share, led by an
adjusted operating margin of 17–19%;
+ Free cash fl ow that exceeds net income; and
+ Balanced capital allocation, returning 40 percent of free cash
fl ow to shareholders through dividends and share repurchases,
with the remainder focused on strategic acquisitions.
LITTELFUSE.COM | 1
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INN OVATIO N
—
At the foundation of our
strategy is our ongoing focus
on innovation, one of our core
values. We anticipate customer
needs and deliver innovative
solutions that add value and
grow our business. We take a
collaborative, partnership-driven
approach in the design and
development of new products.
In 2017, new products accounted
for 28 percent of our revenue.
2 | LITTELFUSE ANNUAL REPORT 2017
KEY STRATEGIC GROWTH OPPO RTUNITIES
In key market niches across our segments, we have
identifi ed several strategic growth opportunities that align
with our strengths and allow us to grow at a faster pace
than the general market. From the Internet of Things (IoT)
to industrial and automotive electronics to the increasing
need for sensors, our targeted areas for growth are centered
on safety, energy effi ciency and the connected world.
INTERNET OF THINGS
Trends in connectivity and the IoT are key drivers for
our continued growth. Increasingly, the things we use
in our day-to-day lives—and the industrial equipment
needed to manufacture these things—are connected to
the Internet. Common household items—from doorbells
and garage door openers to security systems and home
appliances—are becoming more and more sophisticated,
as are the machines, tooling and factories used in
production. They all require circuit protection, power
control and sensing technologies while collecting data
and sending it to the cloud. IoT extends further to the
vehicles we drive. Today’s connected vehicles feature
innovative telematics systems that reduce unscheduled
maintenance and improve reliability. In the future, vehicle-
to-vehicle and vehicle-to-infrastructure connectivity will be
key enablers in the advancement of autonomous driving
technologies. Beyond the added content opportunities
in connected devices and vehicles, we also are seeing
growth from telecom, datacenters and cloud infrastructure
needed to store and analyze the massive amounts of
data these products generate.
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INDUSTRIAL ELECTRONICS
AUTOMOTIVE ELECTRONICS
Another important intersection point that shows solid
long-term growth potential is the need for advanced
circuit protection and power control technologies in
industrial end-markets. With expanding smart grid
initiatives and the ongoing emphasis on energy
effi ciency, there are signifi cant content opportunities
for our electronics products. Smart utility meters,
outdoor LED lighting, energy storage and electric
vehicle (EV) charging stations are all examples of
energy effi ciency and infrastructure projects that
are creating solid demand for our products across
a wide range of industrial applications.
Medium- to high-power industrial motors consume
a signifi cant percentage of the world’s electricity.
Achieving even a 5 percent increase in effi ciency for
these types of applications can drive considerable
energy savings. To obtain these types of improvements,
industrial applications like elevators, pumping stations,
industrial HVAC systems, locomotives and railways as
well as renewable energy and energy storage will all need
more power semiconductors and more circuit protection
technologies. Our acquisition of IXYS fi ts squarely within
our strategy to accelerate growth in these industrial
applications through our expanded power control platform.
The addition of the IXYS portfolio helps grow our offerings
beyond the existing Littelfuse presence in the lower power
range, into medium- to high-power semiconductors.
IXYS has strong customer relationships with industrial
OEMs, which will help to diversify and expand our
presence within the industrial electronics markets.
At the convergence between our electronics products
and automotive customers, we continue to invest in
automotive electronics. Global auto manufacturers are
adding more sophisticated vehicle features to improve
safety with advanced driver assistance systems that
include adaptive cruise control, lane departure warnings
and blind spot monitoring. The increasing focus on driver
comfort and convenience is driving mainstream adoption
of infotainment and navigation systems, powered tailgates
and heated seats and steering wheels to name a few.
Across all these applications, today’s vehicles require
increasingly advanced circuit protection, power control
and sensing technologies, extending opportunities to
increase our content-per-vehicle.
In addition to safety and comfort, the need for fuel
effi ciency and performance improvements is also
driving the increasing electrifi cation of vehicles and our
continued content growth. Automakers are introducing
more complex systems with higher power needs that
often require multiple batteries or lend themselves to
the ongoing evolution toward 48-volt systems. Today’s
most fuel effi cient internal combustion engines rely
on electrically-driven systems that help reduce loads
previously driven from the vehicle’s powertrain.
Innovative vehicle features like ride-leveling, auto
start-stop systems and regenerative braking technologies
are all driving major improvements in performance and
effi ciency—and an increased demand for our products.
LITTELFUSE.COM | 3
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As hybrids and EVs continue to gain momentum, we
see additional opportunities in EV battery management
systems and on-board charging systems as well as
EV charging infrastructure. By leveraging the strong
relationships Littelfuse maintains with automotive
customers, we see meaningful opportunities to
expand the IXYS power semiconductor portfolio
further into the automotive space.
Our electronics sensors help detect position, proximity
and fl uid level, and are playing an increasingly critical
role in today’s household appliances and security systems.
With the acquisition of U.S. Sensor in July 2017, we added
temperature sensing capabilities, expanding our existing
sensing portfolio in several applications ranging from
appliances and home automation to thermostats and
HVAC systems.
SENSORS
Over the past fi ve years, through acquisitions as well
as organic growth, we have developed a successful
global sensing platform to target both electronics and
automotive end users. Similar to the opportunities we see
in automotive electronics, our automotive sensor business
is well-positioned to take advantage of the increasing
focus on the safety, effi ciency and comfort of drivers and
passengers. We offer a comprehensive portfolio of seat
belt buckle sensors to ensure occupant safety as well as
solar sensors that integrate with a vehicle’s automated
climate control system. Our line of speed and positioning
sensors are used in automotive applications like powered
seats and powered tailgates as well as in vehicle
suspensions, transmissions and braking systems.
“Our associates around
the world are doing an
outstanding job of executing
on our strategy by leveraging
our well-established global
presence, industry-leading
products, diversifi ed markets
and strong customer
relationships.”
4 | LITTELFUSE ANNUAL REPORT 2017
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OPERAT IO NAL E X CELLENC E: EV E RYON E , EV ERY DAY, EVERYWHERE
Strong execution and operational excellence provide the foundation for our overall strategy and fi nancial success. To help
drive a continuous improvement mindset through every level of our organization, we continue to implement our comprehensive
operational roadmap, the Littelfuse Operating System (LFOS). Our Enterprise Lean Six Sigma program is a key operational capability,
and one where we have made signifi cant progress. In fact, our manufacturing operations in Dongguan and Suzhou, China, were
recognized by the Association for Manufacturing Excellence (AME) for demonstrated excellence in manufacturing and business.
This is the second year in a row that Littelfuse China operations have been recognized. Our operations in Wuxi, China, received
the AME Excellence Award in 2016.
LEAD E RS HIP /G OVERNANC E U PDATES
In January 2017, we completed our planned leadership succession, where I took over the role of President and Chief Executive Offi cer
and joined the Littelfuse Board of Directors. As part of that transition, Gordon Hunter, Littelfuse Chairman of the Board, President and
Chief Executive Offi cer since 2005, became Executive Chairman of the Board. Effective January 1, 2018, Gordon assumed the role of
Chairman of the Board.
In January 2018, Dr. Nathan Zommer, Founder, and former Chairman and Chief Executive Offi cer of IXYS, joined the Littelfuse
Board of Directors. Dr. Zommer brings more than 30 years of leadership in the semiconductor industry and his experience will
be an asset to our board.
BRIGHT MI ND S . BIG I MPACT.
Our associates around the world are doing an outstanding job of executing on our strategy by leveraging our well-established
global presence, industry-leading products, diversifi ed markets and strong customer relationships. Every day, the bright minds of
our associates make a big impact. I am proud of the more than 11,000 Littelfuse associates around the world as they demonstrate
their dedication and commitment to deliver for our customers and shareholders—and build momentum for the future.
DAVE HEINZMANN
PR ES IDEN T A ND CHI EF EXEC UT I V E OF F I CER
LITTELFUSE.COM | 5
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GAAP TO NON-GAAP RECONCILIATION
$ in millions, except per share data
NON-G AAP EPS R ECONC ILIAT IO N
GAAP diluted EPS
EPS impact of Non-GAAP adjustments (below)
Adjusted diluted EPS
NON-G AAP ADJ US TME NTS – (I NC O ME ) E XP E NSE
Reed switch manufacturing transfer costs
Restructuring
Acquisition-related and integration costs
Impairment of goodwill and intangible assets
Non-GAAP adjustments to operating income
Non-operating foreign exchange loss
Non-GAAP adjustments to income before income taxes
Income taxes
Non-GAAP adjustments to net income
Total EPS impact
FRE E CA SH FLOW RE CONC IL IATI O N
Net cash provided by operating activities
Less: Purchases of property, plant and equipment
Free cash flow
2017
$5.21
$2.53
$7.7 4
2017
$ –
$2.2
$8.1
$ –
$10.3
$2.4
$12.7
($45.3)
$58.0
$2.53
2017
$269.2
($65.9)
$203.3
2016
$4.60
$1.66
$6.26
2016
$1.6
$2.5
$31.1
$14.8
$50.0
$0.5
$50.5
$12.6
$37.9
$1.66
2016
$180.1
($46.2)
$133.9
NET SALES R ECONCI LIAT ION
2017 VS. 2016
Net sales growth
Less:
Acquisitions
Divestitures
FX impact
Organic net sales growth
NON-GAAP FINANCIAL MEASURES
The information included in the letter to shareholders includes the non-GAAP
financial measures of adjusted diluted earnings per share and organic net
sales growth. These non-GAAP financial measures exclude the effect of certain
expenses and income not related directly to the underlying performance of our
fundamental business operations. The company believes that adjusted diluted
earnings per share and organic net sales growth provide useful information
to investors regarding its operational performance because they enhance
an investor’s overall understanding of our core financial performance and
facilitate comparisons to historical results of operations, by excluding items
that are not related directly to the underlying performance of our fundamental
business operations or historical business operations. A reconciliation of
6 | LITTELFUSE ANNUAL REPORT 2017
ELECTRONICS
AUTOMOTIVE
INDUSTRIAL
TOTAL
24%
14%
–
–
10%
9%
5%
–
–
4%
1%
–
(7%)
1%
7%
16%
9%
(1%)
1%
7%
these non-GAAP financial measures to the most directly comparable GAAP
financial measures is included herein. The letter to shareholders also includes
the non-GAAP measure of free cash flow, which is reconciled in the letter. The
company believes free cash flow is a useful measure of its ability to generate
cash. The company believes that these non-GAAP financial measures are
commonly used by financial analysts and others in the industries in which we
operate, and thus further provide useful information to investors. Management
additionally uses these measures when assessing the performance of the
business and for business planning purposes. Note that our definitions of
these non-GAAP financial measures may differ from those terms as defined
or used by other companies.
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(Mark one)
[X]
[ ]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the fiscal year ended December 30, 2017
Or
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the transition period from to
Commission file number 0-20388
LITTELFUSE, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
8755 West Higgins Road, Suite 500
Chicago, Illinois
(Address of principal executive offices)
36-3795742
(I.R.S. Employer Identification No.)
60631
(ZIP Code)
773-628-1000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $0.01 par value
Name of Each Exchange
On Which Registered
NASDAQ Global Select MarketSM
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X] No [ ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “small reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ ] Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The aggregate market value of 22,647,077 shares of voting stock held by non-affiliates of the registrant was approximately $3,736,767,705
based on the last reported sale price of the registrant’s Common Stock as reported on the NASDAQ Global Select MarketSM on July 1,
2017.
As of February 16, 2018, the registrant had outstanding 24,830,204 shares of Common Stock, net of Treasury Shares.
Portions of the Littelfuse, Inc. Proxy Statement for the 2017 Annual Meeting of Stockholders (the “Proxy Statement”) are incorporated by
reference into Part III of this Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
Page
FORWARD-LOOKING STATEMENTS ................................................................................................................
1
PART I
Item 1.
Business .......................................................................................................................................................
Item 1A. Risk Factors .................................................................................................................................................
Item 1B. Unresolved Staff Comments ........................................................................................................................
Item 2.
Properties .....................................................................................................................................................
Legal Proceedings .......................................................................................................................................
Item 3.
Item 4. Mine Safety Disclosures ..............................................................................................................................
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities ................................................................................................................................................
Item 6.
Selected Financial Data ...............................................................................................................................
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ......................
Item 7A. Quantitative and Qualitative Disclosures About Market Risk .....................................................................
Financial Statements and Supplementary Data ...........................................................................................
Item 8.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ......................
Item 9A. Controls and Procedures ..............................................................................................................................
Item 9B. Other Information ........................................................................................................................................
PART III
Item 10. Directors, Executive Officers and Corporate Governance ..........................................................................
Item 11. Executive Compensation .............................................................................................................................
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. ...
Item 13. Certain Relationships and Related Transactions, and Director Independence ............................................
Item 14. Principal Accounting Fees and Services ......................................................................................................
PART IV
Item 15. Exhibits, Financial Statement Schedules. ....................................................................................................
Item 16. Form 10-K Summary ...................................................................................................................................
Schedule II – Valuation and Qualifying Accounts and Reserves ...........................................................
Signatures ...............................................................................................................................................
Exhibit Index ..........................................................................................................................................
1
7
13
13
13
13
14
16
16
33
34
74
74
74
75
76
76
77
77
77
77
78
79
80
i
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report on Form 10-K that are not historical facts are intended to constitute
“forward-looking statements” entitled to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995
(“PSRLA”). These statements may involve risks and uncertainties, including, but not limited to, risks relating to product
demand and market acceptance; economic conditions; the impact of competitive products and pricing; product quality
problems or product recalls; capacity and supply difficulties or constraints; coal mining exposures reserves; failure of an
indemnification for environmental liability; exchange rate fluctuations; commodity price fluctuations; the effect of the
company’s accounting policies; labor disputes; restructuring costs in excess of expectations; pension plan asset returns less
than assumed; uncertainties related to political and regulatory changes; integration of acquisitions including the integration
of the recently acquired business of IXYS Corporation (“IXYS”) and the risk that expected benefits, synergies and growth
prospects of the acquisition of IXYS may not be achieved in a timely manner, or at all; and other risks that may be detailed
in “Item 1A. Risk Factors” below and in the company’s other Securities and Exchange Commission filings.
AVAILABLE INFORMATION
The Company is subject to the reporting and information requirements of the Securities Exchange Act of 1934, as amended
and as a result, are obligated to file annual, quarterly, and current reports, proxy statements, and other information with the
United States Securities and Exchange Commission (“SEC”). The Company makes these filings available free of charge on
its website (http://www.littelfuse.com) as soon as reasonably practicable after it electronically files them with, or furnish
them to, the SEC. Information on the Company’s website does not constitute part of this Annual Report on Form 10-K. In
addition, the SEC maintains a website (http://www.sec.gov) that contains the Company’s annual, quarterly, and current
reports, proxy and information statements, and other information the Company electronically files with, or furnishes to, the
SEC. Any materials the Company files with, or furnish to, the SEC may also be read and/or copied at the SEC’s Public
Reference Room at 100 F Street, N.E., Washington D.C. 20549. Information on the operation of the Public Reference Room
may be obtained by calling the SEC at 1-800-SEC-0330. the Company’s website address is included in this report for
informational purposes only. The Company’s website and the information contained therein or connected thereto are not
incorporated into this Annual Report on Form 10-K.
PART I
ITEM 1. BUSINESS.
GENERAL
Littelfuse, Inc., was incorporated under the laws of the State of Delaware in 1991. References herein to the “Company,”
“we,” “our” or “Littelfuse” refer to Littelfuse, Inc. and its subsidiaries. References herein to “2017”, “fiscal 2017” or “fiscal
year 2017” refer to the fiscal year ended December 30, 2017. References herein to “2016”, “fiscal 2016” or “fiscal year 2016”
refer to the fiscal year ended December 31, 2016. References herein to “2015”, “fiscal 2015” or “fiscal year 2015” refer to
the fiscal year ended January 2, 2016. The Company operates on a 52-53 week fiscal year (4-4-5 basis) ending on the Saturday
closest to December 31. Therefore, the financial results of certain fiscal years and the associated 14 week quarters will not
be exactly comparable to the prior and subsequent 52 week fiscal years and the associated quarters having only 13 weeks. As
a result of using this convention, each of fiscal 2017 and fiscal 2016 contained 52 weeks, whereas fiscal 2015 contained 53
weeks.
OVERVIEW
Founded in 1927, Littelfuse is a global leader in circuit protection products with advancing platforms in power control and
sensor technologies, serving customers in the electronics, automotive, and industrial markets. With a diverse and extensive
product portfolio of fuses, semiconductors, polymers, ceramics, relays and sensors, the Company works with its customers
to build safer, more reliable and more efficient products for the connected world in virtually every market that uses electrical
energy, ranging across consumer electronics, IT and telecommunication applications, industrial electronics, automobiles and
other transportation, and heavy industrial applications
The company maintains a network of global laboratories and engineering centers that develop new products and product
enhancements, provide customer application support and test products for safety, reliability, and regulatory compliance.
1
Segments
The Company conducts its business through three reportable segments: Electronics, Automotive, and Industrial. For each of
these segments, the Company designs, manufactures and sells circuit protection products that protect against electrostatic
discharge, power surges, short circuits, voltage spikes and other harmful occurrences; power control products that safely and
efficiently control power to mitigate equipment damage, minimize electrical hazards and improve productivity; and sensor
products used to identify and detect temperature, proximity, flow speed and fluid level in various applications. For segment
and geographical information and consolidated net sales and operating income see Item 7, Management’s Discussion and
Analysis of Financial Condition and Results of Operations and Note 12, Segment Information, of the Notes to Consolidated
Financial Statements included in this Annual Report.
● Electronics Segment: Consists of one of the broadest product offerings in the industry, including fuses and fuse
accessories, positive temperature coefficient (“PTC”) resettable fuses, polymer electrostatic discharge (“ESD”)
suppressors, varistors, gas discharge tubes; semiconductor and power semiconductor products such as discrete
transient voltage suppressor (“TVS”) diodes, TVS diode arrays, protection and switching thyristors, silicon carbide,
metal-oxide-semiconductor field-effect transistors (“MOSFETs”) and silicon carbide diodes; and insulated gate
bipolar transistors (“IGBT”) technologies. The segment covers a broad range of end markets, including consumer
electronics, automotive electronics, IT and telecommunications equipment, medical devices, lighting products, and
white goods.
● Automotive Segment: Consists of a wide range of circuit protection, power control and sensing technologies for
global original equipment manufacturers (“OEMs”), Tier-I suppliers and parts distributors in the automotive,
commercial vehicle, and agricultural and construction equipment industries. Passenger car fuse products include
fuses and fuse accessories, including blade fuses, battery cable protectors, varistors, high-current fuses, and high-
voltage fuses for hybrid and electric vehicles. Commercial vehicle products include fuses, switches, relays, and
power distribution modules for the commercial vehicle industry. Automotive sensor products include a wide range
of automotive and commercial vehicle products designed to monitor the passenger compartment occupants and
environment as well as the vehicle’s powertrain, emissions, speed and suspension.
●
Industrial Segment: Consists of power fuses, protection relays and controls and other circuit protection products for
use in heavy industrial applications such as mining, oil and gas, energy storage, construction, HVAC systems,
elevator and other industrial equipment.
Strategy
In December 2016, the Company announced its updated strategic plan. Building upon its achievements from its previous
five-year plan and leveraging the global mega trends of safety, energy efficiency and the connected world, the Company is
targeting accelerated annual organic growth of 5-7 percent and annual growth from strategic acquisitions of 5-7 percent. The
Company’s strategic goals include the continuing growth of its circuit protection platform, accelerating growth in its power
control platform and doubling its sensor platform over the next four years. The Company expects to do this through content
and share gains, targeting underpenetrated geographies and markets, leveraging innovation and capitalizing on growth
opportunities where technologies and applications are converging across its segments, while continuing to acquire and
integrate businesses that fit its strategic focus areas.
Recent Acquisitions
●
IXYS Corporation: On January 17, 2018, the Company acquired IXYS Corporation “IXYS”, a global pioneer in the
power semiconductor and integrated circuit markets with a focus on medium to high voltage power control
semiconductors across the industrial, communications, consumer and medical markets. IXYS has a broad customer
base, serving more than 3,500 customers through its direct sales force and global distribution partners. The purchase
price for IXYS was approximately $856.5 million, which included consideration of cash, Littelfuse common stock,
and the value of converted, or cash settled IXYS equity awards. For the twelve months ended December 30, 2017,
IXYS generated net sales of approximately $340 million. IXYS’ operations will be included in the Electronics
segment.
● U.S. Sensor: On July 7, 2017, the Company acquired the assets of U.S. Sensor Corporation (“U.S. Sensor”) for $24.3
million. U.S. Sensor manufactures a variety of high quality negative temperature coefficient thermistors probes and
assemblies. The acquisition expands the Company’s existing sensor portfolio in several key electronics and industrial
end markets. The operations of U.S. Sensor are included in the Electronics segment.
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● Monolith Semiconductor Inc.: On February 28, 2017, pursuant to a Securities Purchase Agreement between the
Company and the stockholders of Monolith Semiconductor Inc. (“Monolith”), a U.S. start-up Company developing
silicon carbide technology, the Company increased its investment in Monolith by acquiring approximately 62% of
the outstanding common stock of Monolith for $15.0 million. The agreement includes provisions whereby the
Company will acquire the remaining outstanding stock of Monolith at a time or times based on Monolith meeting
certain technical and sales targets. The operations of Monolith are included in the Electronics segment.
● ON Portfolio: On August 29, 2016, the Company acquired certain assets of select businesses (the “ON Portfolio”)
of ON Semiconductor Corporation for $104.0 million. The acquired business, which is included in the Electronics
segment, consists of a product portfolio that includes transient voltage suppression (“TVS”) diodes, switching
thyristors, and IGBTs for automotive ignition applications. The acquisition expands the Company’s offerings in
power semiconductor applications as well as increases its presence in the automotive electronics market. The ON
Portfolio products have strong synergies with the Company’s existing circuit protection business, will strengthen its
channel partnerships and customer engagement, and expand its power semiconductor portfolio.
● Menber’s: On April 4, 2016, the Company completed the acquisition of Menber’s S.p.A. (“Menber’s”)
headquartered in Legnago, Italy for $19.2 million (net of cash acquired and after settlement of a working capital
adjustment). The acquired business is part of the Company's commercial vehicle product business within the
Automotive segment and specializes in the design, manufacturing, and selling of manual and electrical high current
switches and trailer connectors for commercial vehicles. The transaction expands the Company’s commercial vehicle
products business globally.
● PolySwitch: On March 25, 2016, the Company acquired 100% of the circuit protection business (“PolySwitch”) of
TE Connectivity Ltd. for $348.3 million (net of cash acquired and after settlement of certain post-closing
adjustments). The PolySwitch business, which is split between the Automotive and Electronics segments, has a
leading position in polymer based resettable circuit protection devices, with a strong global presence in the
automotive, battery, industrial, communications and mobile computing markets. PolySwitch has manufacturing
facilities in Shanghai and Kunshan, China, and Tsukuba, Japan. The acquisition allows the Company to strengthen
its global circuit protection product portfolio, as well as expands its presence in the automotive electronics and
battery end markets. The acquisition also significantly increases the Company’s presence in Japan.
● Sigmar: On October 1, 2015, the Company acquired 100% of Sigmar S.r.l. (“Sigmar”) for $6.5 million (net of cash
acquired and including estimated additional net payments of up to $0.9 million, a portion of which was subject to
the achievement of certain milestones). Located in Ozegna, Italy, Sigmar is a leading global manufacturer of water-
in-fuel sensors and also manufactures selective catalytic reduction (“SCR”) quality sensors and diesel fuel heaters
for automotive and commercial vehicle applications. The acquisition further expanded the Company’s automotive
sensor product line offerings within its Automotive segment.
Sales and Operations
The Company operates in three geographic regions: the Americas, Europe, and Asia-Pacific. The Company manufactures
products and sells to customers in all three regions.
Net sales by segment for the periods indicated are as follows:
(in thousands)
Electronics .......................................................................................... $
Automotive .........................................................................................
Industrial ............................................................................................
Total ............................................................................................ $
2017
661,928 $
453,227
106,379
1,221,534 $
Fiscal Year
2016
535,191 $
415,200
105,768
1,056,159 $
2015
405,497
339,957
122,410
867,864
Net sales in the Company’s three geographic regions, based upon the shipped-to destination, are as follows:
(in thousands)
Americas ............................................................................................ $
Europe ................................................................................................
Asia-Pacific ........................................................................................
Total ............................................................................................ $
2017
436,559 $
243,858
541,117
1,221,534 $
2016
411,105 $
200,277
444,777
1,056,159 $
2015
401,173
152,661
314,030
867,864
Fiscal Year
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The Company’s products are sold worldwide through distributors, a direct sales force and manufacturers’ representatives in
certain regions. For the fiscal year 2017, approximately 69% of the Company’s net sales were to customers outside the United
States (“U.S.”), including approximately 26% to China.
The Company manufactures many of its products on fully integrated manufacturing and assembly equipment. The Company
maintains product quality through a Global Quality Management System with most manufacturing sites certified under ISO
9001:2000. In addition, several of the Littelfuse manufacturing sites are also certified under TS 16949 and ISO 14001.
Additional information regarding the Company’s sales by geographic area and long-lived assets in different geographic areas
is in Note 12, Segment Information, of the Notes to Consolidated Financial Statements included in this Annual Report.
BUSINESS ENVIRONMENT
Electronics Segment
The Company designs, develops and manufactures a wide range of components and modules that provide circuit protection,
power control and sensing for a multitude of electronic and industrial electronics applications. Circuit protection technologies
in the Electronics Segment are designed to protect against harmful occurrences like voltage spikes, short circuits, power
surges and electrostatic discharge. Products include a vast array of fuses and other circuit protection technologies used in a
variety of electronic products including consumer electronics, automotive electronics, IT and telecommunications equipment,
medical devices, lighting products, and white goods.
The Company also offers a wide range of power control products used to convert and regulate energy and safely and
efficiently control power across a broad spectrum of applications including industrial and automotive power systems, motor
drives and power conversion applications. Products include a comprehensive portfolio of semiconductor components
including thyristors, rectifiers and fast recovery diodes, IGBTs and wide band gap devices. The acquisition of IXYS is
expected to accelerate the Company’s growth across the power control market driven by IXYS’s extensive power
semiconductor portfolio in medium and high power applications and technology expertise. With IXYS, the Company will be
able to diversify and expand its presence within industrial electronics markets, leveraging the strong IXYS industrial OEM
customer base. The Company also expects to increase long-term penetration of its power semiconductor portfolio in
automotive markets, expanding its global content per vehicle.
Another strategic area of focus in the Electronics Segment is the Company’s continued investment in silicon carbide, a
promising semiconductor material that enables more efficient power conversion than traditional silicon-based devices. The
Company increased its investment in Monolith during 2017 and introduced its first silicon carbide products to the market.
As products become increasingly sophisticated, smarter and more connected, the need for complex sensor technologies
continues to grow. Sensors products in the Electronics Segment are used in a wide variety of applications including
appliances, security systems, medical equipment, and consumer and industrial controls. With the acquisition of U.S. Sensor,
the Company has added temperature sensors to its existing portfolio.
Automotive Segment
The Company is a primary supplier of fuses and circuit protection technologies to global automotive OEMs, through sales
made to Tier One automotive suppliers, main-fuse box, and wire harness manufacturers that incorporate the fuses into their
products, as well as automotive component parts manufacturers, and automotive parts distributors. The Company also sells
its fuses in the replacement parts market, with its products being sold through merchandisers, discount stores, and service
stations, as well as under private label by national firms.
Circuit protection needs in the automotive space are expected to generate additional content-per-vehicle with the increased
electrification of vehicles, as well as the continued development and market penetration of hybrid and electric vehicles.
Over the past several years, the Company has expanded the Automotive segment into the commercial vehicle market with
various acquisitions, also expanding the Company’s portfolio of power control products. Additional products in this market
include: power distribution modules, low and high current switches, solenoids and relays, electronic switches, battery
management products, ignition key switches, and trailer connectors. Custom and market products are sold directly to a mix
of OEMs, Tier One suppliers, aftermarket channels, as well as through general distribution.
4
The Company continues to expand its automotive sensor business and products and expects this market to provide meaningful
growth opportunities over the long-term. Products sold into the market include a wide range of automotive and commercial
vehicle sensors designed to monitor the passenger compartment occupants and environment as well as the vehicle’s
powertrain, emissions, speed and suspension. A majority of the Company’s automotive sensor sales are made to Tier One
suppliers.
Industrial Segment
The Company manufactures and sells a broad range of low-voltage and medium-voltage circuit protection products to
electrical distributors and their customers in the construction, OEM and industrial maintenance, repair and operating supplies
(“MRO”) markets. The Company also designs and manufactures protection relays for the global mining, oil and gas, and
general industrial markets as well as portable custom electrical equipment for the mining industry in Canada. The Company
sees growth opportunity by expanding both the geographic markets and distributors it serves as well as continuing to invest
in new product development.
Power fuses are used to protect circuits in various types of industrial equipment and in industrial and commercial buildings.
Protection relays are used to protect personnel and equipment in harsh environments such as mining, oil and gas, and
industrial environments from excessive currents, over voltages, and electrical shock hazards called ground faults. Major
applications for protection relays include protection of motor, transformer, and power-line distribution circuits. Ground-fault
relays are used to protect personnel and equipment in wet environments such as underground mining or water treatment
applications where there is a greater risk for electricity to come in contact with water and create a shock hazard.
Littelfuse custom-engineered electrical equipment is designed and built for use in harsh or demanding environments such as
mines, where standard industrial electrical gear will not meet customer needs for reliability and durability.
PRODUCT DESIGN AND DEVELOPMENT
The Company employs scientific, engineering, and other personnel to continually improve its existing product lines and to
develop new products at its research, product design, and development (“R&D”) and engineering facilities in Champaign and
Mt. Prospect, Illinois; Fremont, California; Rapid City, South Dakota; Canada; mainland China; Japan; Italy; the Philippines;
Taiwan, China; Lithuania; Germany; and Mexico. The Company maintains a staff of engineers, chemists, material scientists
and technicians whose primary responsibility is to design and develop new products.
Proposals for the development of new products are initiated primarily by sales, marketing, and product management personnel
with input from customers. The entire product development process usually ranges from a few months to 24 months based
on the complexity of development, with continuous efforts to reduce the development cycle. During fiscal years 2017, 2016,
and 2015, the Company expended $50.5 million, $42.2 million, and $30.8 million, respectively, on R&D.
PATENTS, TRADEMARKS, AND OTHER INTELLECTUAL PROPERTY
The Company generally relies on patents, trademarks, licenses, and nondisclosure agreements to protect its intellectual
property and proprietary products. In cases where it is deemed necessary by management, key employees are required to sign
an agreement that they will maintain the confidentiality of the Company’s proprietary information and trade secrets.
The Company owns a large portfolio of patents worldwide and new products are continually being developed to replace older
products. The Company regularly applies for patent protection on such new products. While, in the aggregate, the Company’s
patents are important in the operation of its businesses, the Company believes that the loss by expiration or otherwise of any
one patent or group of patents would not materially affect its business.
MANUFACTURING
The Company performs the majority of its own fabrication, stamps some of the metal components used in its fuses, holders
and switches from raw metal stock and makes its own contacts and springs. In addition, the Company fabricates silicon wafers
for certain applications and performs its own plating (silver, nickel, zinc, tin, and oxides). Thermoplastic molded component
requirements are met through the Company’s in-house molding capabilities. After components are stamped, molded, plated,
and readied for assembly, final assembly is accomplished on fully automatic and semi-automatic assembly machines. Quality
assurance and operations personnel, using techniques such as statistical process control, perform tests, checks and
measurements during the production process to maintain the highest levels of product quality and customer satisfaction.
5
The principal raw materials for the Company’s products include copper and copper alloys, heat-resistant plastics, zinc,
melamine, glass, silver, gold, raw silicon, solder, and various gases. The Company uses a single source for several heat-
resistant plastics and for zinc, but believes that suitable alternative heat-resistant plastics and zinc are available from other
sources at comparable prices. All other raw materials are purchased from a number of readily available outside sources.
MARKETING
The Company’s sales and marketing staff maintains relationships with major OEMs and global distributors. The Company’s
sales, marketing and engineering personnel also interact directly with OEM engineers to ensure appropriate sensor design,
circuit protection and reliability within the OEM’s parameters. The Company also markets its products indirectly through a
worldwide organization of over 60 manufacturers’ representatives and distributes through an extensive network of
electronics, automotive and electrical distributors.
Electronics Segment
The majority of the Electronics segment’s products are sold through distribution, including global distributors such as Arrow
Electronics, Inc., Future Electronics and TTI, Inc, with most of the remainder sold directly to OEMs. In the Americas, the
Company maintains a direct sales staff and utilizes manufacturers’ representatives to sell its electronics products in the U.S.
and to call on major U.S. and international OEMs and distributors. In Canada, the Company utilizes manufacturers’
representatives and distributors. In Europe and Asia-Pacific regions, the Company also maintains a direct sales staff and
utilizes distributors.
Automotive Segment
The Company maintains a direct sales force to service all the major automotive and commercial vehicle OEMs, system
suppliers, and Tier One suppliers in the U.S. The Company also has manufacturers’ representatives that sell the Company’s
products to aftermarket fuse retailers and commercial vehicle product OEMs.
In Europe, the Company uses both a direct sales force and manufacturers’ representatives to service its OEMs, major system
suppliers and aftermarket distribution customers. In the Asia-Pacific region, the Company uses both a direct sales force and
distributors to supply to major OEM system suppliers and Tier One suppliers.
Industrial Segment
The Company markets and sells its power fuses and protection relays through manufacturers’ representatives across North
America. These representatives sell power fuse products through an electrical and industrial distribution network comprised
of over 2,500 distributor buying locations. These distributors have customers that include electrical contractors,
municipalities, utilities and factories (including both MRO and OEM).
The Company’s field sales force (including regional sales managers and application engineers) and manufacturers’
representatives call on both distributors and end-users (consulting engineers, municipalities, utilities, and OEMs) in an effort
to educate these customers on the capabilities and characteristics of the Company’s products.
CUSTOMERS
The Company sells to over 6,700 customers and distributors worldwide. Sales to Arrow Electronics, Inc., which were reported
in our Electronics, Automotive and Industrial segments were 10.6% of consolidated net sales in 2017 but less than 10% in
2016 and 2015. No other single customer accounted for more than 10% of net sales during any of the last three years. During
fiscal 2017, 2016, and 2015, net sales to customers outside the U.S. accounted for approximately 69%, 66%, and 60%,
respectively, of the Company’s total net sales.
COMPETITION
The Company’s products compete with similar products of other manufacturers, some of which may have substantially
greater financial resources than the Company. In the electronics market, the Company’s competitors include Eaton
Corporation, Bel Fuse Inc., Bourns Inc., EPCOS, ON Semiconductor Corporation, STMicroelectronics NV, Semtech
Corporation, and Vishay Intertechnology Inc. In the automotive market, the Company’s competitors include Eaton
Corporation, Pacific Engineering, MTA, CTS Corporation, Amphenol Corporation, Sensata Technologies Holding NV, and
6
TE Connectivity Ltd. In the industrial market, the Company’s major competitors include Eaton Corporation, GE Multilin,
and Mersen. The Company believes that it competes on the basis of innovative products, the breadth of its product line, the
quality and design of its products, and the responsiveness of its customer service, in addition to price.
BACKLOG
The backlog of unfilled orders at December 30, 2017 was approximately $243.7 million, compared to $110.3 million at
December 31, 2016 with the increase primarily driven by the Electronics segment. Substantially all of the orders currently in
backlog are scheduled for delivery in 2018.
EMPLOYEES
As of December 30, 2017, the Company employed approximately 10,700 employees worldwide. Approximately 20% of the
Company's total workforce was employed under collective bargaining agreements at December 30, 2017. In Mexico, the
Company has two separate collective bargaining agreements, one for 1,500 employees in Piedras Negras, expiring January
31, 2020 and the second for 650 employees in Matamoros, expiring January 1, 2020. Overall, the Company has historically
maintained satisfactory employee relations and considers employee relations to be good.
ENVIRONMENTAL REGULATION
The Company is subject to numerous foreign, federal, state, and local regulations relating to air and water quality, the disposal
of hazardous waste materials, safety and health. Compliance with applicable environmental regulations has not significantly
changed the Company’s competitive position, capital spending or earnings in the past and the Company does not presently
anticipate that compliance with such regulations will change its competitive position, capital spending or earnings for the
foreseeable future.
The Company employs a chemical engineer to monitor regulatory matters and believes that it is currently in compliance in
all material respects with applicable environmental laws and regulations.
Littelfuse GmbH, which was acquired by the Company in May 2004, is responsible for maintaining closed coal mines from
legacy operations. The Company is compliant with German regulations pertaining to the maintenance of the mines and has
an accrual related to certain of these coal mine shafts based on an engineering study estimating the cost of remediating the
dangers (such as a shaft collapse) of certain of these closed coal mine shafts in Germany. The accrual is reviewed annually
and calculated based upon the cost of remediating the shafts. Further information regarding the coal mine liability accrual is
provided in Note 1, Summary of Significant Accounting Policies and Other Information, of the Notes to Consolidated
Financial Statements included in this Annual Report.
ITEM 1A. RISK FACTORS.
The Company’s business, financial condition, and results of operations are subject to various risks and uncertainties,
including the risk factors it has identified below. Any of the following risk factors could materially and adversely affect the
Company’s business, financial condition, or results of operations. These factors are not necessarily listed in order of
importance.
The Company’s industry is subject to intense competitive pressures.
The Company operates in markets that are highly competitive. The Company competes on the basis of price, quality, service,
and / or brand name across the industries and markets it serves. Competitive pressures could affect the prices the Company
is able to charge its customers or the demand for its products.
The Company may not always be able to compete on price, particularly when compared to manufacturers with lower cost
structures. Some of the Company’s competitors have substantially greater sales, financial and manufacturing resources and
may have greater access to capital than the Company. As other companies enter its markets or develop new products,
competition may further intensify. The Company’s failure to compete effectively could materially adversely affect its
business, financial condition, and results of operations.
7
The Company engages in strategic acquisitions and may not realize the anticipated benefits of the acquisitions and / or
may encounter difficulties in integrating these businesses.
The Company seeks to grow through strategic acquisitions. In the past, the Company has acquired a number of businesses or
companies and additional product lines and assets. The Company intends to continue to expand and diversify its operations
with additional future acquisitions.
An acquired business, technology, service or product could under-perform relative to the Company’s expectations and the
price paid for it, or not perform in accordance with the Company’s anticipated timetable. This could cause the Company’s
financial results to differ from expectations in any given fiscal period, or over the long term. The success of these transactions
also depends on the Company’s ability to integrate the assets, operations, and personnel associated with these acquisitions.
The Company may encounter difficulties in integrating acquisitions with the Company’s operations and may not realize the
degree or timing of the benefits that are anticipated from an acquisition.
The Company may also discover liabilities or deficiencies associated with the companies or assets it acquires that were not
identified in advance, which may result in significant unanticipated costs. The effectiveness of the Company’s due diligence
review and its ability to evaluate the results of such due diligence are dependent upon the accuracy and completeness of
statements and disclosures made or actions taken by the companies acquired or their representatives, as well as the limited
amount of time in which acquisitions are executed. In addition, the Company may fail to accurately forecast the financial
impact of an acquisition transaction, including tax and accounting charges. Acquisitions may also result in recording of
significant additional expenses to the results of operations and recording of substantial intangible assets on the balance sheet
upon closing. Any of these factors may adversely affect the Company’s financial condition or results of operations.
Reorganization activities may lead to additional costs and material adverse effects.
In the past, the Company has taken actions to restructure and optimize its production and manufacturing capabilities and
efficiencies through relocations, consolidations, plant closings or asset sales. In the future, the Company may take additional
restructuring actions including the consolidating, closing or selling of additional facilities. These actions could result in
impairment charges and various charges for such items as idle capacity, disposition costs and severance costs, in addition to
normal or attendant risks and uncertainties. The Company may be unsuccessful in any of its current or future efforts to
restructure or consolidate its business. Plans to minimize or eliminate any loss of revenues during restructuring or
consolidation may not be achieved. These activities may have a material adverse effect upon the Company’s business,
financial condition or results of operations.
The Company may be unable to manufacture and deliver products in a manner that is responsive to its customers’ needs.
The end markets for the Company’s products are characterized by technological change, frequent new product introductions
and enhancements, changes in customer requirements and emerging industry standards. The introduction of products
embodying new technologies and the emergence of new industry standards could render its existing products obsolete and
unmarketable before it can recover any or all of its research, development, and commercialization expenses on capital
investments. Furthermore, the life cycles of its products may change and are difficult to estimate.
The Company’s future success will depend upon its ability to manufacture and deliver products in a manner that is responsive
to its customers’ needs. The Company will need to develop and introduce new products and product enhancements on a
timely basis that keep pace with technological developments and emerging industry standards and address increasingly
sophisticated requirements of its customers. The Company invests heavily in research and development without knowing that
it will recover these costs. The Company’s competitors may develop products or technologies that will render its products
non-competitive or obsolete. If it cannot develop and market new products or product enhancements in a timely and cost-
effective manner, its business, financial condition, and results of operations could be materially adversely affected.
The Company’s ability to manage currency or commodity price fluctuations or supply shortages is limited.
As a resource-intensive manufacturing operation, the Company is exposed to a variety of market and asset risks, including
the effects of changes in commodity prices, foreign currency exchange rates, and interest rates. The Company has multiple
sources of supply for the majority of its commodity requirements. However, significant shortages that disrupt the supply of
raw materials or result in price increases could affect prices the Company charges its customers, its product costs, and the
competitive position of its products and services. The Company monitors and manages these exposures as an integral part of
its overall risk management program, which recognizes the unpredictability of markets and seeks to reduce the potentially
adverse effects on its results. Nevertheless, changes in currency exchange rates, commodity prices and interest rates cannot
8
always be predicted. In addition, because of intense price competition and the Company’s high level of fixed costs, it may
not be able to address such changes even if they are foreseeable. Substantial changes in these rates and prices could have a
material adverse effect on the Company’s results of operations and financial condition. In addition, significant portions of its
revenues and earnings are exposed to changes in foreign currency rates. As it operates in multiple foreign currencies, changes
in those currencies relative to the U.S. dollar will impact its revenues and expenses. The impact of possible currency
devaluation in countries experiencing high inflation rates or significant exchange fluctuations can impact the Company’s
results and financial guidance. For additional discussion of interest rate, currency or commodity price risk, see Item 7A,
Quantitative and Qualitative Disclosures about Market Risks.
The Company’s effective tax rate could materially increase as a consequence of various factors, including interpretations
and administrative guidance in regard to the Tax Act (defined below), U.S. and/or international tax legislation, mix of the
Company’s earnings by jurisdiction, and U.S. and foreign jurisdictional tax audits.
On December 22, 2017, the U.S. enacted legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act").
Among other things, the Tax Act reduces the U.S. corporate federal income tax rate from 35% to 21%, adds base broadening
provisions which limit deductions and address tax efficient international structures, imposes a one-time tax (the “Toll
Charge”) on accumulated earnings of certain non-U.S. subsidiaries and enables repatriation of earnings of non-U.S.
subsidiaries free of U.S. federal income tax. Other than the Toll Charge (which is applicable to the Company for 2017), the
provisions will generally be applicable to the Company in 2018 and beyond. In accordance with the guidance provided in
SEC Staff Accounting Bulletin (“SAB”) No. 118, in the fourth quarter of 2017 the Company recorded a charge of $47 million
as a provisional reasonable estimate of the impact of the Tax Act, including $49 million for the Toll Charge net of $2 million
for other net tax benefits. The Company is continuing to analyze the Tax Act and plans to finalize the estimate within the
measurement period outlined in SAB No.118. The final charge may differ from the provisional reasonable estimate (and such
difference may be material) if provisions of the Tax Act, and their interaction with other provisions of the U.S. Internal
Revenue Code, are interpreted differently than interpretations made by the Company in determining the estimate, whether
through issuance of administrative guidance, or through further review of the Tax Act by the Company and its advisors.
Depending upon future interpretations and administrative guidance in respect of the Tax Act’s base broadening provisions,
the Tax Act could have a material adverse effect on the Company’s effective tax rate and cash flows.
The Company is subject to taxes in the U.S. and numerous non-U.S. jurisdictions. Therefore, it is subject to changes in tax
laws in each of these jurisdictions and such changes could have a material adverse affect on the Company’s effective tax rate
and cash flows. As a U.S. Company with significant non-U.S. operations (generally taxed at rates that are lower than the U.S.
statutory rate), it is particularly susceptible to changes in U.S. tax rules. In addition, certain non-U.S. jurisdictions are
considering tax legislation based upon recommendations made by the Organization for Economic Co-operation and
Development in connection with its Base Erosion and Profit Shifting study. The outcome of these legislative developments
could have a material adverse effect on the Company’s effective tax rate and cash flows.
The tax rates applicable in the jurisdictions within which the Company operates vary widely. Therefore, the Company’s
effective tax rate may be adversely affected by changes in the mix of its earnings by jurisdiction.
The Company is also subject to examination of its tax returns by the U.S. Internal Revenue Service and other tax authorities
and governmental bodies. The Company regularly assesses the likelihood of an adverse outcome resulting from these
examinations to determine the adequacy of its provision for income taxes. However, there can be no assurance as to the
outcome of these examinations.
A decline in expected profitability of the Company or individual reporting units of the Company could results in the
impairment of assets, including goodwill and other long-lived assets.
The Company holds material amounts of goodwill and other long-lived assets on its balance sheet. A decline in expected
profitability, particularly if there is a decline in the global economy, could call into question the recoverability of the
Company’s related goodwill and other long-lived tangible and intangible assets and require the write down or write off of
these assets. Such an occurrence has had and could continue to have a material adverse effect on the Company’s consolidated
results of operations, financial position and cash flows.
A significant fluctuation between the U.S. dollar and other currencies could adversely impact the Company's revenue and
earnings.
Although the Company's financial results are reported in U.S. dollars, the majority of the Company’s operations consist of
manufacturing and sales activities in foreign countries. The Company’s most significant net long exposure is to the euro. The
9
Company’s most significant net short exposures are to the Chinese renminbi, Mexican peso, and Philippine peso. Changes
in foreign exchange rates and in particular, an increase in the value of the U.S. dollar against foreign currencies, could have
an adverse effect on profitability and financial condition
The Company’s revenues may vary significantly from period to period.
The Company’s revenues may vary significantly from one accounting period to another due to a variety of factors including:
changes in customers’ buying decisions;
changes in demand for its products;
changes in its distributor inventory stocking;
the Company’s product mix;
the Company’s effectiveness in managing manufacturing processes;
costs and timing of its component purchases;
the effectiveness of its inventory control;
the degree to which it is able to utilize its available manufacturing capacity;
the Company’s ability to meet delivery schedules;
●
●
●
●
●
●
●
●
●
● general economic and industry conditions;
●
local conditions and events that may affect its production volumes, such as labor conditions and political instability;
and
seasonality of certain product lines.
●
The bankruptcy or insolvency of a major customer could adversely affect the Company.
The bankruptcy or insolvency of a major customer could result in lower sales revenue and cause a material adverse effect on
the Company’s business, financial condition, and results of operations. In addition, the bankruptcy or insolvency of a major
U.S. auto manufacturer or significant supplier likely could lead to substantial disruptions in the automotive supply base,
resulting in lower demand for the Company’s products, which likely would cause a decrease in sales revenue and have a
substantial adverse impact on the Company’s business, financial condition and results of operations.
The Company is exposed to political, economic, and other risks that arise from operating a multinational business.
The Company has significant operating activities in numerous countries around the globe that contribute significantly to its
revenues and earnings. Serving a global customer base and remaining competitive in the global marketplace requires the
Company to place its production in countries outside the U.S., including emerging markets, to capitalize on market
opportunities and maintain a cost-efficient structure. In addition, the Company sources a significant amount of raw materials
and other components from third-party suppliers in low-cost countries. The Company’s operating activities are subject to a
number of risks generally associated with multi-national operations, including risks relating to the following:
currency fluctuations and exchange restrictions;
import and export duties and restrictions;
the imposition of tariffs and other import or export barriers;
compliance with regulations governing import and export activities;
current and changing regulatory requirements;
● general economic conditions;
●
●
●
●
●
● political and economic instability;
● potentially adverse income tax consequences;
transportation delays and interruptions;
●
●
labor unrest;
● natural disasters;
terrorist activities;
●
● public health concerns;
● difficulties in staffing and managing multi-national operations; and
●
limitations on the Company’s ability to enforce legal rights and remedies.
Any of these factors could have a material adverse effect on the Company’s business, financial condition and results of
operations.
10
Disruptions in the Company’s manufacturing, supply or distribution chain could result in an adverse impact on results
of operations.
The Company sources materials and sell product through various international network channels. A disruption could occur
within the Company’s manufacturing, distribution or supply chain network. This could include damage or destruction due to
various causes including natural disasters or political instability which would cause one or more of these network channels
to become non-operational. This could adversely affect the Company’s ability to manufacture or deliver its products in a
timely manner, impair its ability to meet customer demand for products and result in lost sales or damage to its reputation.
Such a disruption could have a material adverse effect upon the Company’s business, financial condition or results of
operations.
The inability to maintain access to capital markets may adversely affect the Company’s business and financial results.
The Company’s ability to invest in its businesses, make strategic acquisitions, and refinance maturing debt obligations may
require access to the capital markets and sufficient bank credit lines to support short-term borrowings. If the Company is
unable to access the capital markets or bank credit facilities, it could experience a material adverse effect on its business,
financial condition, and results of operations.
Fixed costs may reduce operating results if sales fall below expectations.
The Company’s expense levels are based, in part, on its expectations for future sales. Many of the Company’s expenses,
particularly those relating to capital equipment and manufacturing overhead, are relatively fixed. The Company might be
unable to reduce spending quickly enough to compensate for reductions in sales. Accordingly, shortfalls in sales could
materially and adversely affect the Company’s operating results.
The volatility of the Company’s stock price could affect the value of an investment in the Company’s stock and future
financial position.
The market price of the Company’s stock can fluctuate widely. Between December 31, 2016 and December 30, 2017, the
closing sale price of the Company’s common stock ranged between a low of $146.94 and a high of $215.00. The volatility
of the stock price may be related to any number of factors, such as volatility in the financial markets, general macroeconomic
conditions, industry conditions, analysts’ expectations concerning the Company’s results of operations, or the volatility of its
revenues as discussed above under “The Company’s Revenues May Vary Significantly from Period to Period.” The historic
market price of the Company’s common stock may not be indicative of future market prices. The Company may not be able
to sustain or increase the value of its common stock. Declines in the market price of the Company’s stock could adversely
affect the Company’s ability to retain personnel with stock incentives, to acquire businesses or assets in exchange for stock
and/or to conduct future financing activities with or involving the Company’s common stock.
The Company is exposed to, and may be adversely affected by, potential security breaches or other disruptions to its
information technology systems and data security.
The Company relies on its information technology systems and networks in connection with many of its business activities.
Some of these networks and systems are managed by third-party service providers and are not under the Company’s direct
control. The Company’s operations routinely involve receiving, storing, processing and transmitting sensitive information
pertaining to its business, customers, dealers, suppliers, employees, and other sensitive matters. As with most companies, the
Company has experienced cyber-attacks, attempts to breach its systems, and other similar incidents, none of which have been
material. Any future cyber incidents could, however, materially disrupt operational systems; result in loss of trade secrets or
other proprietary or competitively sensitive information; compromise personally identifiable information regarding
customers or employees; and jeopardize the security of the Company’s facilities. A cyber incident could be caused by
malicious outsiders using sophisticated methods to circumvent firewalls, encryption, and other security defenses. Because
techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized
until they are launched against a target, the Company may be unable to anticipate these techniques or to implement adequate
preventative measures. Information technology security threats, including security breaches, computer malware, and other
cyber-attacks are increasing in both frequency and sophistication and could create financial liability, subject the Company to
legal or regulatory sanctions or damage the Company’s reputation with customers, dealers, suppliers, and other stakeholders.
The Company continuously seeks to maintain a robust program of information security and controls, but the impact of a
material information technology event could have a material adverse effect on the Company’s competitive position,
reputation, results of operations, financial condition, and cash flows.
11
The Company’s business may be interrupted by labor disputes or other interruptions of supplies.
A work stoppage could occur at certain of the Company’s facilities, most likely as a result of disputes under collective
bargaining agreements or in connection with negotiations of new collective bargaining agreements. In addition, the Company
may experience a shortage of supplies for various reasons, such as financial distress, work stoppages, natural disasters or
production difficulties that may affect one of its suppliers. A significant work stoppage, or an interruption or shortage of
supplies for any reason, if protracted, could substantially adversely affect the Company’s business, financial condition, and
results of operations. The transfer of the Company’s manufacturing operations and changes in its distribution model could
disrupt operations for a limited time.
Failure to attract and retain qualified personnel could affect the Company’s business results.
The Company’s success, both generally and in connection with mergers and acquisitions, depends on the Company’s ability
to attract, retain, and motivate a highly-skilled and diverse management team and workforce. Failure to ensure that the
Company has the depth and breadth of personnel with the necessary skill set and experience could impede its ability to deliver
growth objectives and execute the Company’s strategy. Competition for qualified employees among companies that rely
heavily upon engineering and technology is at times intense, and the loss of qualified employees could hinder the Company’s
ability to conduct research activities successfully and develop marketable products.
Environmental liabilities could adversely impact the Company’s financial position.
Foreign, federal, state and local laws and regulations impose various restrictions and controls on the discharge of materials,
chemicals and gases used in the Company’s manufacturing processes or in its finished goods. These environmental
regulations have required the Company to expend a portion of its resources and capital on relevant compliance programs.
Under these laws and regulations, the Company could be held financially responsible for remedial measures if its current or
former properties are contaminated or if it sends waste to a landfill or recycling facility that becomes contaminated, even if
the Company did not cause the contamination. The Company may be subject to additional common law claims if it releases
substances that damage or harm third parties. In addition, future changes in environmental laws or regulations may require
additional investments in capital equipment or the implementation of additional compliance programs. Any failure to comply
with new or existing environmental laws or regulations could subject the Company to significant liabilities and could have a
material adverse effect on its business, financial condition or results of operations.
In the conduct of manufacturing operations, the Company has handled and does handle materials that are considered
hazardous, toxic or volatile under federal, state, and local laws. The risk of accidental release of such materials cannot be
completely eliminated. In addition, the Company operates or owns facilities located on or near real property that was formerly
owned and operated by others. Certain of these properties were used in ways that involved hazardous materials. Contaminants
may migrate from, within or through these properties. These releases or migrations may give rise to claims. Where third
parties are responsible for contamination, the third parties may not have funds, or not make funds available when needed, to
pay remediation costs imposed upon the Company under environmental laws and regulations.
The Company is responsible for the maintenance of discontinued coal mining operations in Germany. The risk of
environmental remediation exists and the Company is in the process of remediating the mines considered to be the most at
risk.
Customer demands and new regulations related to conflict-free minerals may force the Company to incur additional
expenses.
The Dodd-Frank Wall Street Reform and Consumer Protection Act requires disclosure of use of “conflict” minerals mined
from the Democratic Republic of Congo and adjoining countries and efforts to prevent the use of such minerals. In the
semiconductor industry, these minerals are most commonly found in metals. As there may be only a limited number of
suppliers offering “conflict free” metals, the Company cannot be certain that it will be able to obtain necessary metals in
sufficient quantities or at competitive prices. Also, the Company may face challenges with its customers and suppliers if it is
unable to sufficiently verify that the metals used in its products are “conflict free.”
The Company may not be successful protecting its patents and trademarks.
The Company considers its intellectual property, including patents, trade names, and trademarks, to be of significant value
to its business as a whole. The Company’s products are manufactured, marketed, and sold under a portfolio of patents,
12
trademarks, licenses, and other forms of intellectual property, some of which expire or are allowed to lapse at various dates
in the future. The Company develops and acquires new intellectual property on an ongoing basis and consider all of its
intellectual property to be valuable. The Company's policy is to file applications and obtain patents for the great majority of
its novel and innovative new products including product modifications and improvements. Based on the broad scope of its
product lines, the Company believes that the loss or expiration of any single intellectual property right would not have a
material adverse effect upon its business, financial condition or results of operations; however, multiple losses or expirations
could have a material adverse effect upon the Company’s business, financial condition or results of operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES.
The Company’s operations are located in approximately 50 owned or leased facilities worldwide, totaling approximately 2.8
million square feet. The Company’s owned facilities include approximately 1.8 million square feet and the Company’s leased
facilities include approximately 1.0 million square feet. The Company’s corporate headquarters is located in the U.S. in
Chicago, Illinois.
The Company’s primary North American manufacturing facilities include: (i) Saskatoon, Canada and Rapid City, South
Dakota which manufacture products for the Industrial segment, (ii) Melchor Muzquiz and Matamoros, Mexico which
manufacture products primarily for the Automotive segment, and (iii) Piedras Negras, Mexico, which primarily manufactures
products for the Automotive segment as well as the Industrial segment.
The Company’s primary European manufacturing facilities include Kaunas, Lithuania, and Legnago and Ozegna, Italy, all
of which manufacture products for the Automotive segment.
The Company’s primary Asia-Pacific manufacturing facilities include: (i) Lipa City, Philippines, (ii) Inashiki, Japan, and (iii)
Suzhou, Wuxi, Kunshan, Dongguan, and Shanghai, China, which manufacture products for the Electronics segment as well
as the Automotive segment.
The Company also has engineering and research and development, sales, and distribution centers located in Asia, North
America, and Europe.
The Company believes its facilities are adequate to meet its requirements for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any material legal proceedings, other than routine litigation incidental to its business.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
13
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND
ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Shares of the Company’s common stock are traded under the symbol “LFUS” on the NASDAQ Global Select MarketSM.
The table below provides information with respect to the Company’s quarterly stock prices and cash dividends declared and
paid for each quarter during fiscal 2017 and 2016:
4Q
3Q
2017
2Q
1Q
4Q
3Q
2Q
1Q
2016
High ............................... $ 215.00 $ 199.26 $ 173.14 $ 167.21 $ 156.54 $ 130.79 $ 123.15 $ 124.59
90.61
Low ............................... 182.03 161.65 149.81 146.94 124.32 113.42 106.26
Close ............................. 197.82 195.88 165.00 159.91 151.77 128.81 116.56 123.40
0.29
Dividends ......................
0.29
0.33
0.33
0.37
0.33
0.37
0.33
Number of Holders
As of February 16, 2018, there were 79 holders of record of the Company’s common stock.
Dividend Policy
The Company expects that its practice of paying quarterly dividends on its common stock will continue, although future
dividend policy will be determined by the Board of Directors based upon its evaluation of earnings, cash availability, and
general business prospects. Currently, there are restrictions on the payment of dividends contained in the Company’s credit
agreements that relate to the maintenance of certain financial ratios. However, the Company expects to continue paying cash
dividends on a quarterly basis for the foreseeable future.
Recent Sales of Unregistered Securities
There were no sales of unregistered securities by us or affiliates during the three months ended December 30, 2017.
Purchases of Equity Securities
The Company’s Board of Directors authorized the repurchase of up to 1,000,000 shares of the Company’s common stock
under a program for the period May 1, 2017 to April 30, 2018. The Company did not repurchase any shares of its common
stock during fiscal 2017 and 1,000,000 shares may yet be purchased under the program as of December 30, 2017.
The table below presents shares of the Company’s common stock which were acquired by the Company during the three
months ended December 30, 2017:
Period
October 1 through October 31 ..................
November 1 through November 30 ..........
December 1 through December 30 ...........
Total .........................................................
Total number
of shares
purchased
Average price
paid per share
—
—
—
—
—
—
—
—
Total number of
shares purchased
as part of publicly
announced plans
or programs
Maximum
number (or
approximate
dollar value) of
shares that may
yet be purchased
under the plans or
programs
—
—
—
—
1,000,000
1,000,000
1,000,000
1,000,000
14
Stock Performance Graph
The following stock performance graph and related information shall not be deemed “soliciting material” or “filed” with
the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filings
under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that the Company
specifically incorporates it by reference into such filing.
The following stock performance graph compares the five-year cumulative total return on Littelfuse common stock to the
five-year cumulative total returns on the Russell 2000 Index and the Dow Jones Electrical Components and Equipment
Industry Group Index. The Company believes that the Russell 2000 Index and the Dow Jones Electrical Components and
Equipment Industry Group Index represent a broad market index and peer industry group for total return performance
comparison. The stock performance shown on the graph below represents historical stock performance and is not necessarily
indicative of future stock price performance.
Littelfuse, Inc. .................................................................. $
Russell 2000 .....................................................................
Dow Jones US Electrical Components & Equipment ......
12/12 12/13 12/14 12/15 12/16 12/17
337
160 $
194
146
217
149
100 $
100
100
152 $
139
138
257 $
169
171
179 $
139
141
The Dow Jones Electrical Components and Equipment Industry Group Index includes the common stock of A. O. Smith
Corp.; AAON, Inc.; American Superconductor Corp.; AMETEK, Inc.; Amphenol Corp.; Arrow Electronics, Inc.; Avnet,
Inc.; AVX Corp.; Capstone Turbine Corp.; CTS Corp.; General Cable Corp.; Hubbell Inc. Class B; Jabil Circuit, Inc.;
KEMET Corp.; Littelfuse, Inc.; Methode Electronics, Inc.; Plexus Corp.; Powerwave Technologies, Inc.; Regal-Beloit Corp.;
Vicor Corp.; and Vishay Intertechnology, Inc.
15
In the case of the Russell 2000 Index and the Dow Jones Electrical Components and Equipment Industry Group Index, a
$100 investment made on December 29, 2012 and reinvestment of all dividends is assumed. In the case of the Company, a
$100 investment made on December 29, 2012 is assumed. Returns for the Company’s fiscal years presented above are as of
the last day of the respective fiscal year which was, December 28, 2013, December 27, 2014, January 2, 2016, December 31,
2016, and December 30, 2017 for the fiscal years 2013, 2014, 2015, 2016, and 2017, respectively.
ITEM 6. SELECTED FINANCIAL DATA.
The information presented below provides selected financial data of the Company during the past five fiscal years and should
be read in conjunction with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations,
and Item 8, Financial Statements and Supplementary Data, for the respective years presented:
(in thousands, except per share data)
Net sales ............................................................... $ 1,221,534 $ 1,056,159 $
413,117
Gross profit ..........................................................
130,644
Operating income .................................................
Net income ...........................................................
104,488
Per share of common stock:
Income from continuing operations
506,533
218,511
119,519
2017
2016
2015
867,864 $
330,499
104,157
80,866
2014
851,995 $
324,428
133,830
98,100
2013
757,853
296,232
129,881
87,814
3.94
5.27
- Basic ...........................................................
3.90
5.21
- Diluted ........................................................
0.84
1.40
Cash dividends paid .............................................
Cash and cash equivalents ....................................
305,192
429,676
Total assets ........................................................... 1,740,102 1,491,194 1,065,475 1,069,859 1,024,373
126,000
6,250
Short-term debt .....................................................
93,750
489,361
Long-term debt, less current portion ....................
4.35
4.32
0.94
297,571
3.58
3.56
1.08
328,786
4.63
4.60
1.24
275,124
88,500
105,691
6,250
447,892
87,000
83,753
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The following discussion of Littelfuse’s financial condition and results of operations should be read together with the
Consolidated Financial Statements and notes to those statements included in Item 8 of Part II of this Annual Report on Form
10-K.
Business
For a description of the Company’s business, segments and product offerings, see Item 1, Business.
2017 EXECUTIVE OVERVIEW
Net sales increased by $165.4 million, or 15.7%, in 2017 compared to 2016. The increase in net sales was primarily driven
by the acquisitions of ON Portfolio, PolySwitch, and U.S. Sensor, higher volume and growth across each of the Electronics
segment reporting units and volume growth in the Automotive segment driven by increases in passenger car and commercial
vehicle businesses.
For the year ended December 30, 2017, the Company recognized net income of $119.5 million, or $5.21 per diluted share
compared to net income of $104.5 million, or $4.60 per diluted share for the year ended December 31, 2016. Net income
increased due to the impacts of the acquisitions and volume increases, higher gross profit largely driven by a favorable mix
within the Electronics segment, a $14.8 million impairment to goodwill and other intangible assets impairment charge
recorded in the Custom Products reporting unit in 2016 partially offset by higher income tax expense primarily driven by the
enactment of the Tax Cuts and Jobs Act in December 2017.
Net cash provided by operating activities was $269.2 million for the year ended December 30, 2017 as compared to $180.1
million for the year ended December 31, 2016. The increase in net cash provided by operating activities reflected higher
earnings, lower cash taxes, lower acquisition-related and integration payments and the impact of working capital changes
largely driven by collections efficiency and lower vendor prepayments.
On January 17, 2018, the Company acquired IXYS Corporation “IXYS”, a global pioneer in the power semiconductor and
integrated circuit markets with a focus on medium to high voltage power control semiconductors across the industrial,
16
communications, consumer and medical markets. IXYS has a broad customer base, serving more than 3,500 customers
through its direct sales force and global distribution partners. The purchase price for IXYS was approximately $856.5 million,
which included consideration of cash, Littelfuse common stock, and the value of converted or cash settled IXYS equity
awards. For the twelve months ended December 30, 2017, IXYS generated net sales of approximately $340 million. IXYS’
operations will be included in the Electronics segment.
On July 7, 2017, the Company acquired the assets of U.S. Sensor for $24.3 million. The acquired business, which is included
in the Electronics segment expands the Company’s existing sensor portfolio in several key electronics and industrial end
markets. U.S. Sensor manufactures a variety of high quality negative temperature coefficient thermistors as well as thermistor
probes and assemblies. Product lines also include thin film platinum resistance temperature detectors (“RTDs”) and RTD
assemblies.
On February 28, 2017, pursuant to a Securities Purchase Agreement between the Company and the stockholders of
Monolith, a U.S. start-up Company developing silicon carbide technology, and conditioned on Monolith achieving a
product development milestone and other provisions, the Company acquired approximately 62% of the outstanding
common stock of Monolith for $15 million. This was in addition to the Company’s initial investment of $3.5 million in the
preferred stock of Monolith Semiconductor in December 2015. Monolith operations are included in the Electronics
segment.
On October 13, 2017, the Company amended its existing credit agreement to increase the unsecured revolving credit facility
from $575.0 million to $700.0 million, increase the unsecured term loan credit facility from $125.0 million to $200.0 million
and to extend the expiration date from March 4, 2021 to October 13, 2022. The credit agreement also includes the option for
the Company to increase the size of the revolving credit facility and the term loan facility by up to an additional $300.0
million, in the aggregate, subject to the satisfaction of certain conditions set forth in the credit agreement. Additionally, on
November 15, 2017, the Company entered into a note purchase agreement pursuant to which the Company issued and sold
$175 million in aggregate principal amount of senior notes. On January 16, 2018, $50 million in aggregate principal amount
of 3.48% Senior Notes, Series A, due February 15, 2025 and $125 million in aggregate principal amount of 3.78% Senior
Notes, Series B, due February 15, 2030 were funded.
OUTLOOK
Vision and Strategy
The Company works with its customers to design and develop technologies that help them build safer, more reliable and
more efficient products for the connected world in virtually every market that uses electrical energy, ranging across consumer
electronics, IT and telecommunication applications, industrial electronics, automobiles and other transportation, and heavy
industrial applications. Built upon that framework, the Company’s strategy is centered on growing its core circuit protection
business, accelerating its growth in power control, and doubling its sensor platform.
The Company’s strategic plan is focused on maximizing shareholder value by driving profitable sales growth, earnings per
share growth, strong cash flow generation, and maintaining a balanced approach to capital allocation. The Company pursues
the following major strategic initiatives, which are summarized below, along with more specific areas of focus.
Strategic Objective
Double digit sales growth
2018 and Future Priorities
● Grow through increased product content with existing customers and increased market share
● Expand portfolio into new and underpenetrated geographies and end markets
● Increase innovation capabilities and investments
● Expand presence in products and applications that are converging across business segments
● Targeted mergers and acquisitions
EPS growth
● Focus on higher profitability growth opportunities
● Grow operating margins through operational excellence
● Disciplined approach to managing costs
Cash flow and liquidity
● Disciplined management of working capital
● Prudent deployment of capital
● Disciplined approach to mergers and acquisitions
● Grow dividend in line with earnings
● Periodic share repurchases
17
The Company’s strategy is to generate profitable sales growth. In order to accomplish this, The Company is focusing on
accelerating organic growth by increasing its content and share gains, enhancing technology efforts to drive innovation,
capitalizing on cross segment opportunities, and gaining traction in underpenetrated geographies and markets. The Company
will continue to make targeted strategic acquisitions that align to its strategy and financial targets to support new business,
products, markets, and technologies while leveraging existing customers.
Management believes that sustaining profitability through a combination of profitable organic growth and acquisitions is
critical to the Company’s competitiveness, while enhancing value the Company delivers to its customers. In addition, the
Company continues to implement initiatives across all platforms to enhance productivity while managing its cost structure,
including integration of operations and streamlining administrative and support activities to drive operating margins.
The Company seeks to deploy its capital using a balanced approach. Priorities for capital deployment, over time, include
investments to drive increased organic growth, targeted acquisitions that align to the Company’s strategic and financial
metrics and returning capital to shareholders through dividends and periodic share repurchases.
The Company uses several key indicators to gauge progress toward achieving these objectives. These indicators include
organic sales growth, operating margins, cash flow from operations and capital expenditures. The Company targets long-
term sales double digit sales growth, split between 5-7% annual organic sales growth and 5-7% annual growth from strategic
acquisitions, while targeting operating margins between 17% and 19% and double-digit earnings per share growth. Cash flow
from operations less capital expenditures is targeted to approximate net income but in any given year can be significantly
impacted by the timing of non-recurring or infrequent expenditures.
Significant Accounting Policies and Critical Estimates
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s most
critical accounting policies are those that are most important to the portrayal of its financial condition and results of
operations, and which require the Company to make its most difficult and subjective judgments, often as a result of the need
to make estimates of matters that are inherently uncertain. The Company has identified the following as its most critical
accounting policies and judgments. Although management believes that its estimates and assumptions are reasonable, they
are based upon information available when they are made, and therefore, actual results may differ from these estimates under
different assumptions or conditions. The Company has reviewed these critical accounting policies and related disclosures
with the Audit Committee of its Board of Directors. Significant accounting policies are more fully described in the Notes to
Consolidated Financial Statements included elsewhere in this Annual Report.
Net Sales
Revenue Recognition: The Company recognizes revenue on product sales in the period in which the sales process is complete.
This generally occurs when persuasive evidence of an arrangement exists, products are shipped (FOB origin) to the customer
in accordance with the terms of the sale, the risk of loss has been transferred, collectability is reasonably assured and the
pricing is fixed and determinable. At the end of each period, for those shipments where title to the products and the risk of
loss and rewards of ownership do not transfer until the product has been received by the customer, the Company adjusts sales
and cost of sales for the delay between the time that the products are shipped and when they are received by the customer.
The Company’s distribution channels are primarily through direct sales and independent third-party distributors.
Revenue and Billing: The Company accepts orders from customers based on long term purchasing contracts and written sales
agreements. Contract pricing and selling agreement terms are based on market factors, costs, and competition. Pricing
normally is negotiated as an adjustment (premium or discount) from the Company’s published price lists. The customer is
invoiced when the Company’s products are shipped to them in accordance with the terms of the sales agreement.
Returns and Credits: Some of the terms of the Company’s sales agreements and normal business conditions provide
customers (distributors) the ability to receive price adjustments on products previously shipped and invoiced. This practice
is common in the industry and is referred to as a “ship and debit” program. This program allows the distributor to debit the
Company for the difference between the distributors’ contracted price and a lower price for specific transactions. Under
certain circumstances (usually in a competitive situation or large volume opportunity), a distributor will request authorization
18
to reduce its price to its buyer. If the Company approves such a reduction, the distributor is authorized to “debit” its account
for the difference between the contracted price and the lower approved price. The Company establishes reserves for this
program based on historic activity and actual authorizations for the debit and recognizes these debits as a reduction of revenue.
Return to Stock: The Company has a return to stock policy whereby a customer, with previous authorization from
management, can return previously purchased goods for full or partial credit. The Company establishes an estimated
allowance for these returns based on historic activity. Sales revenue and cost of sales are reduced to anticipate estimated
returns.
Volume Rebates: The Company offers incentives to certain customers to achieve specific quarterly or annual sales targets. If
customers achieve their sales targets, they are entitled to rebates. The Company estimates the future cost of these rebates and
recognizes this estimated cost as a reduction to revenue as products are sold.
Allowance for Doubtful Accounts: The Company evaluates the collectability of its trade receivables based on a combination
of factors. The Company regularly analyzes its significant customer accounts and, when the Company becomes aware of a
specific customer’s inability to meet its financial obligations, the Company records a specific reserve for bad debt to reduce
the related receivable to the amount the Company reasonably believes is collectible. The Company also records allowances
for all other customers based on a variety of factors including the length of time the receivables are past due, the financial
health of the customer, macroeconomic considerations and past experience. Historically, the allowance for doubtful accounts
has been adequate to cover bad debts. If circumstances related to specific customers change, the estimates of the recoverability
of receivables could be further adjusted.
Inventory
The Company performs regular detailed assessments of inventory, which include a review of, among other factors, demand
requirements, product life cycle and development plans, component cost trends, product pricing, shelf life, and quality issues.
Based on the analysis, the Company records adjustments to inventory for excess quantities, obsolescence or impairment when
appropriate to reflect inventory at net realizable value. Historically, inventory reserves have been adequate to reflect inventory
at net realizable values. During 2017, the Company was required to step up the value of inventory acquired in business
combinations to its selling prices less the cost to sell under business combination accounting. This step-up was approximately
$1.6 million for the U.S. Sensor acquisition in 2017.
Goodwill
The Company’s methodology for allocating the purchase price of acquisitions is based on established valuation techniques
that reflect the consideration of a number of factors, including valuations performed by third-party appraisers when
appropriate. Goodwill is measured as the excess of the cost of an acquired entity over the fair value assigned to identifiable
assets acquired and liabilities assumed. Based on its current organization structure, the Company has seven reporting units
for which cash flows are determinable and to which goodwill has be allocated. Goodwill is either assigned to a specific
reporting unit or allocated between reporting units based on the relative excess fair value of each reporting unit.
The Company annually tests goodwill for impairment on the first day of its fiscal fourth quarter, or more frequently if an
event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its
carrying value. The Company also performs an interim review for indicators of impairment each quarter to assess whether
an interim impairment review is required for any reporting unit. As part of its interim reviews, management analyzes potential
changes in the value of individual reporting units based on each reporting unit’s operating results for the period compared to
expected results as of the prior year’s annual impairment test. In addition, management considers how other key assumptions,
including discount rates and expected long-term growth rates, used in the last annual impairment test, could be impacted by
changes in market conditions and economic events. Based on the interim assessments, management concluded that no events
or changes in circumstances indicated that it was more likely than not that the fair value for any reporting unit had declined
below its carrying value
Quantitative Assessment for Impairment
For the seven reporting units with goodwill, the Company compared the estimated fair value of each reporting unit to its
carrying value. If the carrying value of a reporting unit exceeded the estimated fair value, the difference between the estimated
fair value and carrying value is recorded as the amount of the goodwill impairment charge. The results of the goodwill
impairment test as of October 1, 2017 indicated that the estimated fair values for each of the seven reporting units with
19
goodwill exceeded their respective carrying values. Accordingly, there were no goodwill impairment charges recorded as
part of the Company’s 2017 annual goodwill impairment test.
As part of its impairment test for these reporting units, the Company engaged a third-party appraisal firm to assist in the
Company’s determination of the estimated fair values. This determination included estimating the fair value of each reporting
unit using both the income and market approaches. The income approach requires management to estimate a number of
factors for each reporting unit, including projected operating results, economic projections, anticipated future cash flows,
discount rates and the allocation of shared or corporate items. The market approach estimates fair values using comparable
marketplace fair value data from within a comparable industry grouping. The Company weighted both the income and market
approach equally to estimate the concluded fair value of each reporting unit. The determination of fair value requires the
Company to make significant estimates and assumptions, which primarily include, but are not limited to: the selection of
appropriate peer group companies; control premiums appropriate for acquisitions in which the Company competes; the
discount rate; terminal growth rates; and forecasts of revenue, operating income, depreciation and amortization and capital
expenditures.
Goodwill Impairment Assumptions
Although the Company believes its estimates of fair value are reasonable, actual financial results could differ from those
estimates due to the inherent uncertainty involved in making such estimates. Changes in assumptions concerning future
financial results or other underlying assumptions could have a significant impact on the fair value of the reporting units.
Future declines in the overall market value of the Company’s equity may also result in a conclusion that the fair value of one
or more reporting units has declined below its carrying value.
One measure of the sensitivity of the amount of goodwill impairment charges to key assumptions is the amount by which
each reporting unit “passed” (fair value exceeds the carrying value”) the goodwill impairment test. All seven of the reporting
units passed the goodwill impairment test, with fair values that exceeded the carrying values by between 25% and 314% of
their respective estimated fair values. As of the most recent annual test conducted on October 1, 2017, the Company noted
that the excess of fair value over the carrying value, was 161%, 314%, 247%, 218%, 100%, 25%, and 248% for its reporting
units: Electronics (non-silicon), Electronics (silicon), Passenger Car, Commercial Vehicle Products, Sensors, Relays, and
Power Fuse, respectively. Relatively small changes in the Company’s key assumptions would not have resulted in any
reporting units failing the goodwill impairment test.
Generally, changes in estimates of expected future cash flows would have a similar effect on the estimated fair value of the
reporting unit. That is, a 1.0% decrease in estimated annual future cash flows would decrease the estimated fair value of the
reporting unit by approximately 1.0%. The estimated long-term net sales growth rate can have a significant impact on the
estimated future cash flows, and therefore, the fair value of each reporting unit. A 1.0% decrease in the long-term net sales
growth rate would have resulted in no reporting units failing the goodwill impairment test. Of the other key assumptions that
impact the estimated fair values, most reporting units have the greatest sensitivity to changes in the estimated discount rate.
The estimated discount rate was 9.6% for all reporting units except for Relays which had a discount rate of 10.1%. A 1.0%
increase in the estimated discount rates would have resulted in no reporting units failing the annual goodwill impairment test.
The Company believes that its estimates of future cash flows and discount rates are reasonable, but future changes in the
underlying assumptions could differ due to the inherent uncertainty in making such estimates. Additionally, price
deterioration or lower volume could have a significant impact on the fair values of the reporting units.
Long-Lived Assets
The Company evaluates the recoverability of other long-lived assets, including property, plant and equipment and certain
identifiable intangible assets, whenever events or changes in circumstances indicate that the carrying value of an asset or
asset group may not be recoverable. Factors which could trigger an impairment review include significant underperformance
relative to historical or projected operating results, significant changes in the manner of use of the assets or the strategy for
the overall business, a significant decrease in the market value of the assets or significant negative industry or economic
trends. When the Company determines that the carrying value of long-lived assets may not be recoverable based upon the
existence of one or more of the indicators, the assets are assessed for impairment based on the estimated future undiscounted
cash flows expected to result from the use of the asset and its eventual disposition. If the carrying value of an asset exceeds
its estimated future undiscounted cash flows, an impairment loss is recorded for the excess of the asset’s carrying value over
its fair value. During the year ended December 30, 2017, the Company recognized non-cash impairment charges of $2.9
million related to certain machinery and equipment in the Electronics and Automotive segments due to changes in the
expected use of these certain assets. During the year ended December 31, 2016, the Company recognized non-cash
20
impairment charges totaling $6.0 million, of which $2.2 million related to the impairment of certain customer relationship
intangible assets in the Custom Products reporting unit within the Industrial segment and $3.8 million related to the
impairment of the Custom Products tradename. The impairment of the customer relationship intangible assets resulted from
lower expectations of future revenue to be derived from those relationships while the tradename impairment resulted from
lower expectations of future cash flows of the Custom Products reporting unit.
Environmental Liabilities
Environmental liabilities are accrued based on estimates of the probability of potential future environmental exposure. Costs
related to on-going maintenance of environmental sites are expensed as incurred. If actual or estimated probable future losses
exceed the Company’s recorded liability for such claims, it would record additional charges as other expense during the
period in which the actual loss or change in estimate occurred. The Company evaluates its reserve for coal mine remediation
annually utilizing a third party expert.
Pension and Supplemental Executive Retirement Plan
The Company records annual income and expense amounts relating to its pension and postretirement benefits plans based on
calculations which include various actuarial assumptions including discount rates, expected long-term rates of return and
compensation increases. The Company reviews its actuarial assumptions on an annual basis as of the fiscal year-end balance
sheet date (or more frequently if a significant event requiring remeasurement occurs) and modifies the assumption based on
current rates and trends when it is appropriate to do so. The effects of modifications are recognized immediately on the
Consolidated Balance Sheets, but are generally amortized into operating earnings over future periods, with the deferred
amount recorded in accumulated other comprehensive income (loss). The Company believes that the assumptions utilized in
recording its obligations under its plans are reasonable based on its experience, market conditions and input from its actuaries
and investment advisors. The Company maintains several pension plans in international locations. The expected returns on
plan assets and discount rates are determined based on each plan’s investment approach, local interest rates and plan
participant profiles. The discount rates for the Company’s defined benefit plans primarily in Europe and the Asia-Pacific
regions at December 30, 2017 and December 31, 2016 were 3.1% and 2.6%, respectively. During 2015, the Company settled
its U.S. defined benefit pension plan as described in Note 8, Benefit Plans, of the Notes to Consolidated Financial Statements
included in this Annual Report.
A 50 basis point change in the discount rates at December 30, 2017 would have the following effect on the projected benefit
obligation:
(in millions)
Projected benefit obligation ............................................................................................. $
0.5%
Increase
0.5%
Decrease
(5.6 ) $
6.2
Equity-based Compensation
Equity-based compensation expense is recorded for stock-option awards and restricted share units based upon the fair values
of the awards. The fair value of stock-option awards is estimated at the grant date using the Black-Scholes option pricing
model, which includes assumptions for volatility, expected term, risk-free interest rate and dividend yield. Expected volatility
is based on implied volatilities from traded options on Littelfuse stock, historical volatility of Littelfuse stock and other
factors. Historical data is used to estimate employee termination experience and the expected term of the options. The risk-
free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The Company initiated a quarterly
cash dividend in 2010 and expects to continue making cash dividend payments in the foreseeable future.
Total equity-based compensation expense for all equity compensation plans was $17.3 million, $12.8 million, and $10.7
million in 2017, 2016, and 2015, respectively. Further information regarding this expense is provided in Note 9,
Shareholders’ Equity, of the Notes to Consolidated Financial Statements included in this Annual Report.
Income Taxes
The Company accounts for income taxes using the liability method. Deferred taxes are recognized for the future effects of
temporary differences between financial and income tax reporting using tax rates in effect for the years in which the
differences are expected to reverse. The Company recognizes deferred taxes for temporary differences, operating loss
carryforwards and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance if it is more likely than
21
not that some portion, or all, of the deferred tax assets will not be realized. U.S. state and non-U.S. income taxes are provided
on the portion of foreign income that is expected to be remitted to the U.S. and be taxable (and non-U.S. income taxes are
provided on the portion of non-U.S. income that is expected to be remitted to an upper-tier non-U.S. entity).
Deferred income taxes are not provided on the excess of the investment value for financial reporting over the tax basis of
investments in those non-U.S. subsidiaries for which such excess is considered to be permanently reinvested in those
operations. The Company recognized deferred tax liabilities of $12.0 million ($11.8 million for non-U.S. taxes and $0.2
million for U.S. state taxes) as of December 30, 2017 related to taxes on certain non-U.S. earnings which are not considered
to be permanently reinvested. Management regularly evaluates whether foreign earnings are expected to be permanently
reinvested. This evaluation requires judgment about the future operating and liquidity needs of the Company’s non-U.S.
subsidiaries. Changes in economic and business conditions, foreign or U.S. tax laws (such as the Tax Act), or the Company’s
financial situation could result in changes to these judgments and the need to record additional tax liabilities.
In accordance with the guidance provided in SEC SAB No. 118, in the fourth quarter of 2017 the Company recorded a charge
of $47 million as a provisional reasonable estimate of the impact of the Tax Act, including $49 million for the Toll Charge
net of $2 million for other net tax benefits. The Company is continuing to analyze the Tax Act and plans to finalize the
estimate within the measurement period outlined in SAB No.118. The final charge may differ from the provisional reasonable
estimate if provisions of the Tax Act, and their interaction with other provisions of the U.S. Internal Revenue Code, are
interpreted differently than interpretations made by the Company in determining the estimate, whether through issuance of
administrative guidance, or through further review of the Tax Act by the Company and its advisors. Aside from these
interpretation issues, the final charge may differ from the provisional reasonable estimate due to refinements of accumulated
non-U.S. earnings and tax pool data.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position
will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits
recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than
50% likelihood of being realized upon ultimate settlement.
Further information regarding income taxes, including a detailed reconciliation of current year activity, is provided in Note
10, Income Taxes, of the Notes to Consolidated Financial Statements included in this Annual Report.
Off-Balance Sheet Arrangements
Other than non-cancellable operating lease commitments, the Company does not have off-balance sheet arrangements,
financings or special purpose entities.
Financial Review
In the financial review that follows, the Company discusses its consolidated results of operations, financial position, cash
flows and certain other information. This discussion should be read in conjunction with the Company’s Consolidated
Financial Statements and related notes that begin on page F-1.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 30, 2017 AS COMPARED TO THE YEAR
ENDED DECEMBER 31, 2016
The following table summarizes the Company’s consolidated results of operations for periods presented. The fiscal year 2017
includes approximately $10.3 million of non-segment charges. These included acquisition-related and integration costs
related to legal, accounting and other expenses associated with completed or pending acquisitions of approximately $8.0
million, including $1.6 million of purchase accounting inventory charges related to the Company’s 2017 acquisition of U.S.
Sensor as described in Note 2, Acquisitions and Dispositions, of the Notes to the Consolidated Financial Statements included
in this Annual Report, and $2.2 million of charges related to restructuring and production transfers in the Company’s Asia
operations.
The fiscal year 2016 includes approximately $50.0 million of non-segment charges. These included $14.8 million of charges
related to the impairment of the Custom Products reporting unit, $21.4 million of acquisition and integration costs associated
with the Company’s 2016 acquisitions, primarily PolySwitch, $7.8 million of non-cash fair value step-up inventory charges
relating to the Company’s 2016 acquisitions, primarily PolySwitch, as described in Note 2, Acquisitions and Dispositions, of
the Notes to Consolidated Financial Statements included in this Annual Report, $1.9 million in charges related to the closure
22
of the Company’s manufacturing facility in Denmark, $1.6 million related to the Company’s transfer of its reed sensor
manufacturing operations from the U.S. and China to the Philippines, and $2.5 million related to restructuring costs.
Fiscal year 2017 also included approximately $2.4 million in foreign currency expenses primarily attributable to changes in
the value of the euro, Philippine peso and Chinese renminbi against the U.S. dollar, while fiscal year 2016 also included
approximately $0.5 million in foreign currency expenses primarily attributable to changes in the value of the euro, Philippine
peso and Chinese renminbi against the U.S. dollar.
(in thousands, except % change)
Sales ............................................................................ $
Gross profit .................................................................
Operating expenses .....................................................
Operating income ........................................................
Other expense (income), net ........................................
Income before income taxes ........................................
Income taxes ...............................................................
Net income ..................................................................
Fiscal Year
2017
1,221,534 $
506,533
288,022
218,511
(1,282)
204,037
84,518
119,519
2016
1,056,159 $
413,117
282,473
130,644
(1,730)
123,274
18,786
104,488
Change
% Change
165,375
93,416
5,549
87,867
(448)
80,763
65,732
15,031
15.7%
22.6%
2.0%
67.3%
(25.9%)
65.5%
349.9%
14.4%
Sales
Net sales for 2017 of $1,221.5 million increased $165.4 million, or 15.7%, compared to the prior year, resulting from the
prior year acquisitions of PolySwitch, ON Portfolio, and Menber’s and $5.4 million from the current year U.S. Sensor
acquisition. The remaining increase in net sales was primarily due to higher volume across all product lines in the Electronics
segment and passenger car and commercial vehicle businesses within the Automotive segment partially offset by the
divestitures of two non-core product lines within the Industrial segment in 2016.
Gross Profit
Gross profit was $506.5 million, or 41.5% of sales, in 2017, compared to $413.1 million, or 39.1% of sales, in 2016. The
increase in gross profit and gross margin reflects the incremental net sales and improved leverage in expenses and profits
related to the prior year acquisitions, primarily in the Electronics segment.
Operating Expenses
Total operating expenses were $288.0 million, or 23.6% of net sales, for 2017 compared to $282.5 million, or 26.7% of net
sales, for 2016. The increase in operating expenses of $5.5 million was primarily due to acquisitions, higher selling costs,
higher research and development costs of $8.3 million and an increase of $5.4 million in amortization expense of intangible
assets due to the acquisitions, partially offset by the $14.8 million of goodwill and other intangible asset impairment charges
recognized in 2016 and lower acquisition-related expenses and integration costs of $13.4 million. Selling, general and
administrative expenses increased by $6.7 million to $212.8 million, but decreased from 19.5% to 17.4% as a percentage of
net sales for 2017 compared to 2016 primarily as a result of lower acquisition-related expenses and integration costs of $13.4
million and cost control initiatives partially offset by the acquisitions.
Operating Income
Operating income for 2017 was $218.5 million, an increase of $87.9 million or 67.3% compared to $130.6 million for 2016.
The increase in operating income was the result of acquisitions and higher volume in the Electronics segment. Operating
margins increased from 12.4% to 17.9% for 2017 due to the acquisitions, improvement in gross margins primarily driven by
the Electronics segment, lower acquisition and integration related costs, the prior year goodwill and other intangible asset
impairment charge and operational efficiencies. Also, the prior year goodwill and other intangible asset impairment charge
reduced the operating margin by 1.4% in 2016.
Income Before Income Taxes
Income before income taxes for 2017 was $204.0 million, or 16.7% of net sales compared to $123.3 million, or 11.7% of net
sales, for 2016. Income before income taxes was impacted by an increase in operating income described above, partially
offset by higher interest expense of $4.8 million reflecting increased borrowings and unfavorable changes in foreign exchange
23
rates of $1.9 million primarily as a result of fluctuations in the Chinese renminbi and Philippine peso against the U.S. dollar
partially offset by fluctuations in the Euro against U.S. dollar.
Income Taxes
Income tax expense for 2017 was $84.5 million, or an effective tax rate of 41.4% compared to income tax expense of $18.8
million, or an effective tax rate of 15.2%, for 2016. The increase in 2017 reflects a fourth quarter charge of $47 million as a
provisional reasonable estimate of the impact of the Tax Act, including $49 million for the Toll Charge net of $2 million for
other net tax benefits. The Company is continuing to analyze the Tax Act and plans to finalize the estimate within the
measurement period outlined in SAB No.118. The final charge may differ from the provisional reasonable estimate if
provisions of the Tax Act, and their interaction with other provisions of the U.S. Internal Revenue Code, are interpreted
differently than interpretations made by the Company in determining the estimate, whether through issuance of administrative
guidance, or through further review of the Tax Act by the Company and its advisors. Aside from these interpretation issues,
the final charge may differ from the provisional reasonable estimate due to refinements of accumulated non-U.S. earnings
and tax pool data. Excluding the impact of the Tax Act, the effective tax rates for 2017 and 2016 are lower than the U.S.
statutory tax rate primarily due to income earned in lower tax jurisdictions partially offset by the impact of taxes on unremitted
earnings, and, with respect to 2016, a one-time deduction with respect to the stock of one of the Company’s affiliates, partially
offset by the impact of the impairment of goodwill for which no tax benefit was recorded.
Segment Information
The Company reports its operations by the following segments: Electronics, Automotive and Industrial. Segment information
is described more fully in Note 12, Segment Information, of the Notes to Consolidated Financial Statements included in this
Annual Report.
The following table is a summary of the Company’s net sales by segment:
(in millions)
Electronics .................................................................................... $
Automotive ...................................................................................
Industrial ......................................................................................
Total ...................................................................................... $
Electronics Segment
Fiscal Year
2017
2016
Change
661.9 $
453.2
106.4
1,221.5 $
535.2 $
415.2
105.8
1,056.2 $
% Change
23.7%
9.2%
0.6%
15.7%
126.7
38.0
0.6
165.3
The Electronics segment net sales increased $126.7 million, or 23.7%, in 2017 compared to 2016 primarily due to the
PolySwitch, and ON Portfolio acquisitions in 2016, and the U.S Sensor acquisition in 2017 along with higher volume across
the passives, sensors and semiconductor product lines.
Automotive Segment
Net sales in the Automotive segment increased $38.0 million, or 9.2%, in 2017 compared to 2016 primarily due to the
incremental net sales associated with the PolySwitch and Menber’s acquisitions in 2016, higher volume in passenger car and
commercial vehicle products and favorable foreign exchange impacts of $1.9 million, partially offset by lower volume in
automotive sensor products.
Industrial Segment
The Industrial segment net sales increased $0.6 million, or 0.6%, in 2017 compared to 2016 primarily due higher volume
across all product lines, partially offset by the divestiture of two non-core product lines, one in the fourth quarter of 2016 and
the other in the first quarter of 2016.
24
Geographic Sales Information
Sales by geography represent sales to customer or distributor locations. The following table is a summary of the Company’s
net sales by geography:
(in millions)
Americas .............................................................................. $
Europe ..................................................................................
Asia-Pacific ..........................................................................
Total .............................................................................. $
2017
2016
Change
% Change
436.5 $
243.9
541.1
1,221.5 $
411.1 $
200.3
444.8
1,056.2 $
25.4
43.6
96.3
165.3
6.2%
21.8%
21.7%
15.7%
Fiscal Year
Americas
Net sales in the Americas increased $25.4 million, or 6.2%, in 2017 compared to 2016 resulting from acquisitions and higher
volume in the passive and semiconductor product lines in the Electronics segment and the passenger car and commercial
vehicle businesses in the Automotive segment that were partially offset by lower volume in sensor products in the Automotive
segment and the divestiture of a non-core product line in the Industrial segment.
Europe
European net sales increased $43.6 million, or 21.8%, in 2017 compared to 2016. The increase in net sales was primarily due
to acquisitions and increased net sales across all product lines in the Electronics segment and the passenger car and
commercial vehicle products businesses in the Automotive segment.
Asia-Pacific
Asia-Pacific net sales increased $96.3 million, or 21.7%, in 2017 compared to 2016, primarily due to incremental net sales
from prior year acquisitions and increased volume across all product lines in the Electronics segment.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2016 AS COMPARED TO THE YEAR
ENDED JANUARY 2, 2016
The following table summarizes the Company’s consolidated results of operations for periods presented. The fiscal year 2016
includes approximately $50.0 million of non-segment charges. These included $14.8 million of charges related to the
impairment of the Custom Products reporting unit, $21.4 million of acquisition and integration costs associated with the
Company’s 2016 acquisitions, primarily PolySwitch, $7.8 million of non-cash fair value step-up inventory charges relating
to the Company’s 2016 acquisitions, primarily PolySwitch, as described in Note 2, Acquisitions and Dispositions, of the
Notes to Consolidated Financial Statements included in this Annual Report, $1.9 million in charges related to the closure of
the Company’s manufacturing facility in Denmark, $1.6 million related to the Company’s transfer of its reed sensor
manufacturing operations from the U.S. and China to the Philippines, and $2.5 million related to restructuring costs.
Fiscal year 2015 includes approximately $45.2 million of other non-segment charges. These included $5.2 million related to
the Company’s transfer of its reed sensor manufacturing operations from the U.S. and China to the Philippines, $3.6 million
related to restructuring, $4.6 million related to acquisition costs and $31.9 million of expense related to the planned
termination of the U.S. pension as described in Note 8, Benefit Plans, of the Notes to Consolidated Financial Statements
included in this Annual Report.
Fiscal year 2016 also included approximately $0.5 million in foreign currency expenses primarily attributable to changes in
the value of the euro, Philippine peso and Chinese renminbi against the U.S. dollar, while fiscal year 2015 also included $1.5
million in foreign currency gains primarily attributable to changes in the value of both the euro and Philippine peso against
the U.S. dollar.
25
Fiscal Year
2016
(in thousands, except % change)
Sales ............................................................................................. $ 1,056,159 $
413,117
Gross profit ..................................................................................
282,473
Operating expenses ......................................................................
130,644
Operating income .........................................................................
(1,730)
Other expense (income), net .........................................................
123,274
Income before income taxes .........................................................
18,786
Income taxes ................................................................................
104,488
Net income ...................................................................................
Sales
2015
867,864 $
330,499
226,342
104,157
(5,417)
106,948
26,082
80,866
Change
% Change
188,295
82,618
56,131
26,487
3,687
16,326
(7,296 )
23,622
21.7%
25.0%
24.8%
25.4%
(68.1%)
15.3%
(28.0%)
29.2%
Net sales for 2016 of $1,056.2 million increased $188.3 million, or 21.7%, compared to the prior year, reflecting $170.2
million of incremental revenues from businesses acquired over the previous two years as well as organic growth in the
Electronics and Automotive segments, partially offset by lower sales from the Industrial segment due to weaker end markets.
The Company also experienced $7.3 million in unfavorable foreign currency effects in 2016 compared to 2015 primarily
resulting from sales denominated in Chinese renminbi.
The increase in sales in 2016 reflects a $75.2 million, or 22%, increase in Automotive segment sales and a $129.7 million, or
32%, increase in Electronics segment sales, partially offset by a $16.6 million, or 14%, decrease in Industrial segment sales.
Gross Profit
Gross profit was $413.1 million, or 39.1% of sales, in 2016, compared to $330.5 million, or 38.1% of sales, in 2015. Gross
profit for 2016 was negatively impacted by $10.8 million of charges primarily related to the inventory step-up from the
acquisition of PolySwitch and to a lesser extent the ON Portfolio and Menber’s acquisitions. Gross profit for 2015 was
negatively impacted by $5.2 million of charges related to the transfer of the Company’s reed switch production from the U.S.
and China to the Philippines.
Operating Expenses
Total operating expense was $282.5 million, or 26.7% of net sales, for 2016 compared to $226.3 million, or 26.1% of net
sales, for 2015. Operating expense in 2016 included $39.1 million of charges primarily consisting of acquisition and
integration costs of $21.4 million and $14.8 million of charges related to the impairment of the Custom Products reporting
unit. Operating expense in 2015 included $39.9 million of charges, primarily related to the U.S. pension settlement of $31.9
million and restructuring and acquisition costs of $8.0 million.
Operating Income
Operating income was $130.6 million, or 12.4% of net sales, in 2016 compared to $104.2 million, or 12.0% of net sales, in
the prior year. The increase in operating income in the current year was due primarily to higher revenue as well as the factors
affecting operating expenses discussed above.
Interest expense was $8.6 million in 2016 compared to $4.1 million in 2015 and is primarily related to the Company’s
increased borrowing to fund acquisitions.
Foreign exchange (gain) loss was $0.5 million of loss in 2016 compared to $1.5 million of gain in 2015. The fluctuation in
foreign exchange was primarily attributable to changes in the value of the euro, Philippine peso and Chinese renminbi against
the U.S. dollar in 2016 and 2015.
Other Expense (Income), Net
Other expense (income), net, consisting of interest income, royalties and non-operating income was $1.7 million of income
in 2016 compared to $5.4 million of income in 2015. The year-over-year decrease in income primarily reflects lower interest
income in 2016.
26
Income Taxes
Income tax expense was $18.8 million with an effective tax rate of 15.2% in 2016 compared to income tax expense of $26.1
million with an effective tax rate of 24.4% in 2015. The effective tax rates for these periods are lower than the U.S. statutory
tax rate primarily due to income earned in lower tax jurisdictions and, with respect to the 2016 period, a one-time deduction
with respect to the stock of one of the Company’s affiliates partially offset by the impact of the impairment of goodwill for
which no tax benefit was recorded and taxes on unremitted earnings, and, with respect to the 2015 period, the impact of a
pension settlement partially offset by the impact from the restructuring of the legal ownership of the Company’s Mexican
manufacturing operations.
Segment Information
The Company reports its operations by the following segments: Electronics, Automotive and Industrial. Segment information
is described more fully in Note 12, Segment Information, of the Notes to Consolidated Financial Statements included in this
Annual Report.
The following table is a summary of the Company’s net sales by segment:
(in millions)
Electronics .......................................................................................... $
Automotive .........................................................................................
Industrial ............................................................................................
Total ............................................................................................ $
2016
2015
Change
535.2 $
415.2
105.8
1,056.2 $
405.5 $
340.0
122.4
867.9 $
129.7
75.2
(16.6 )
188.3
Fiscal Year
Electronics Segment
The Electronics segment, which accounted for approximately 51% of total sales in 2016, has produced modest organic
revenue growth over the last few years. In 2016, sales increased $129.7 million, or 32%, compared to the prior year, reflecting
$110.0 million of sales from businesses acquired in 2016 as well as organic growth in sensor products and to a lesser extent
passive and semiconductor products. Operating margins also improved in 2016 compared to 2015 due to better leverage from
the higher sales, as well as favorable product and regional mix.
Fourth quarter 2016 sales were unseasonably strong due to higher demand in some markets, along with an earlier than usual
Chinese New Year. The book-to-bill ratio of 1.05 at the end of the fourth quarter is primarily due to stronger than normal
seasonal trends.
Automotive Segment
The Automotive segment, which accounted for approximately 39% of total sales in 2016, has been the Company’s fastest
growing business over the last few years. In 2016, sales increased $75.2 million, or 22%, compared to the prior year, reflecting
$60.2 million of incremental sales from businesses acquired in 2016 and the fourth quarter of 2015 as well as organic growth
related to sensor and passenger car products. These increases in sales were partially offset by lower sales of legacy
commercial vehicle products, reflecting weakness in the North American heavy truck, construction, and agricultural end
markets.
The segment realized growth in fuse content which was driven by more sophisticated electronics in vehicles and sales of
high-current products, especially the Masterfuse® line. Also contributing to segment performance was the automotive sensor
business which experienced strong growth in sales and a significant improvement in margins. Sales in China were strong due
to the Chinese government’s tax incentives for smaller cars driving higher growth in the China car industry.
Industrial Segment
The Industrial segment, which accounted for approximately 10% of total sales in 2016, experienced a sales decrease of 14%
over the prior year with declines across all businesses. The Company also divested certain non-core product lines during
2016. See Note 2, Acquisitions and Dispositions of the Notes to the Consolidated Financial Statements included in this Annual
Report, for additional information. The Company’s power fuse business has benefited from a strong U.S. solar market in
recent years; however, this market slowed in the second half of 2016. Sales in the protection relay business continued to be
27
impacted by weakness in the heavy industrial and oil and gas markets, as those customers have restricted their capital
spending. In the custom products business, the Company continued to see a decline in the potash market, which has resulted
in the aforementioned impairment charge in the third quarter of 2016. It is possible that the Company could recognize
impairment charges for the Relays reporting unit if there are declines in profitability or projected future operating results due
to changes in volume, market pricing, cost, or the business environment.
Geographic Sales Information
Sales by geography represent sales to customer or distributor locations. The following table is a summary of the Company’s
net sales by geography:
(in millions)
Americas ............................................................................................ $
Europe ................................................................................................
Asia-Pacific ........................................................................................
Total ............................................................................................ $
2016
2015
Change
411.1 $
200.3
444.8
1,056.2 $
401.2 $
152.7
314.0
867.9 $
9.9
47.6
130.8
188.3
Fiscal Year
Americas
Sales in the Americas increased $9.9 million, or 2%, in 2016 compared to 2015, primarily due to acquisitions and increased
demand for Electronics products, partially offset by lower Industrial sales. Electronics sales increased $23.3 million, or 20%,
primarily due to acquisitions as well as increased sales for passive and sensor products. Industrial sales decreased $14.0
million, or 13%, resulting from decreases in demand for power fuses, custom products, and relay products.
Europe
European sales increased $47.6 million, or 31%, in 2016 compared to 2015 primarily due to acquisitions and increased
demand for Automotive and Electronics products, partially offset by lower Industrial sales. Automotive sales increased $26.8
million, or 27%, in 2016 primarily due to acquisitions and increased sales for sensor products. Electronics sales increased
$22.4 million, or 46%, primarily due to acquisitions as well as increased sales for the passive and sensor products. Industrial
sales decreased $1.5 million, or 24%, in 2016 primarily from lower sales of fuse and relay products.
Asia-Pacific
Asia-Pacific sales increased $130.8 million, or 42%, in 2016 compared to 2015, primarily due to acquisitions and increased
demand for Automotive and Electronics products offset by lower Industrial sales and changes in foreign exchange rates of
$5.4 million. Electronics sales increased $84.0 million, or 35%, primarily due to acquisitions as well as increased sales for
passive and sensor products partially offset by $2.3 million due to changes in foreign exchange rates. Automotive sales
increased $47.8 million, or 72%, primarily due to acquisitions as well as increased sales for passenger car and sensor products,
partially offset by $3.3 million of changes in foreign exchange rates. Industrial sales decreased $1.2 million, or 13%.
Liquidity and Capital Resources
Cash and cash equivalents were $429.7 million as of December 30, 2017, an increase of $154.6 million as compared to
December 31, 2016.
As of December 30, 2017, $309.5 million of the $429.7 million of the Company’s cash and cash equivalents was held by
non-U.S. subsidiaries. Of the $309.5 million, at least $160 million can be repatriated with minimal tax consequences. With
respect to the remaining $149.5 million, the Company has recognized deferred tax liabilities of $12.0 million as of December
30, 2017 (including $11.8 million for non-U.S. taxes and $0.2 million for U.S. state taxes) on approximately $118 million of
the non-U.S. cash balance because the amounts are not considered to be permanently reinvested. In addition, repatriation of
some non-U.S. cash balances is further restricted by local laws. Management regularly evaluates whether non-U.S. earnings
are expected to be permanently reinvested. This evaluation requires judgment about the future operating and liquidity needs
of the Company and its non-U.S. subsidiaries. Changes in economic and business conditions, tax laws, or the Company’s
financial situation could result in changes to these judgments and the need to record additional tax liabilities.
28
The Company has historically supported its liquidity needs through cash flows from operations. Management expects that
the Company’s (i) current level of cash, cash equivalents, and marketable securities, (ii) current and forecasted cash flows
from operations, (iii) availability under existing funding arrangements, and (iv) access to capital in the capital markets will
provide sufficient funds to support the Company’s operations, capital expenditures, investments, and debt obligations on both
a short-term and long-term basis.
Revolving Credit Facility/Term Loan
On March 4, 2016, the Company entered into a five-year credit agreement (“Credit Agreement”) with a group of lenders for
up to $700.0 million. The Credit Agreement consisted of an unsecured revolving credit facility (“Revolving Credit Facility”)
of $575.0 million and an unsecured term loan credit facility (“Term Loan”) of up to $125.0 million. In addition, the Company
had the ability, from time to time, to increase the size of the Revolving Credit Facility and the Term Loan by up to an
additional $150.0 million, in the aggregate, in each case in minimum increments of $25.0 million, subject to certain conditions
and the agreement of participating lenders. For the Term Loan, the Company was required to make quarterly principal
payments of $1.6 million through March 31, 2018 and $3.1 million from June 30, 2018 through December 31, 2020 with the
remaining balance due on March 4, 2021.
On October 13, 2017, the Company amended the Credit Agreement to increase the Revolving Credit Facility from $575.0
million to $700.0 million and increase the Term Loan from $125.0 million to $200.0 million and to extend the expiration
date from March 4, 2021 to October 13, 2022. The Credit Agreement also includes the option for the Company to increase
the size of the Revolving Credit Facility and the Term Loan by up to an additional $300.0 million, in the aggregate, subject
to the satisfaction of certain conditions set forth in the Credit Agreement. Term Loans may be made in up to two advances.
The first advance of $125.0 million occurred on October 13, 2017 and the second advance of $75.0 million occurred on
January 16, 2018. For the Term Loan, the Company is required to make quarterly principal payments of 1.25% of the original
term loan ($1.6 million as of December 30, 2017 increasing to $2.5 million with the second advance on January 16, 2018)
through maturity, with the remaining balance due on October 13, 2022
Outstanding borrowings under the Credit Agreement bear interest, at the Company’s option, at either LIBOR, fixed for
interest periods of one, two, three or six-month periods, plus 1.00% to 2.00%, or at the bank’s Base Rate, as defined, plus
0.00% to 1.00%, based upon the Company’s Consolidated Leverage Ratio, as defined. The Company is also required to pay
commitment fees on unused portions of the credit agreement ranging from 0.15% to 0.25%, based on the Consolidated
Leverage Ratio, as defined. The credit agreement includes representations, covenants and events of default that are customary
for financing transactions of this nature. The effective interest rate on outstanding borrowings under the credit facility was
3.07% at December 30, 2017.
Senior Notes
On December 8, 2016, the Company entered into a Note Purchase Agreement, pursuant to which the Company issued and
sold €212 million aggregate principal amount of senior notes in two series. The funding date for the Euro denominated senior
notes occurred on December 8, 2016 for €117 million in aggregate amount of 1.14% Senior Notes, Series A, due December
8, 2023 (“Euro Senior Notes, Series A due 2023”), and €95 million in aggregate amount of 1.83% Senior Notes, Series B
due December 8, 2028 (“Euro Senior Notes, Series B due 2028”) (together, the “Euro Senior Notes”). Interest on the Euro
Senior Notes is payable semiannually on June 8 and December 8, commencing June 8, 2017.
On December 8, 2016, the Company entered into a Note Purchase Agreement, pursuant to which the Company issued and
sold $125 million aggregate principal amount of senior notes in two series. On February 15, 2017, $25 million in aggregate
principal amount of 3.03% Senior Notes, Series A, due February 15, 2022 (“U.S. Senior Notes, Series A due 2022”), and
$100 million in aggregate principal amount of 3.74% Senior Notes, Series B, due February 15, 2027 (“U.S. Senior Notes,
Series B due 2027”) (together, the “U.S. Senior Notes due 2022 and 2027”) were funded. Interest on the U.S. Senior Notes
due 2022 and 2027 is payable semiannually on February 15 and August 15, commencing August 15, 2017.
On November 15, 2017, the Company entered into a Note Purchase Agreement pursuant to which the Company issued and
sold $175 million in aggregate principal amount of senior notes in two series. On January 16, 2018, $50 million aggregate
principal amount of 3.48% Senior Notes, Series A, due February 15, 2025 (“U.S. Senior Notes, Series A due 2025”) and
$125 million in aggregate principal amount of 3.78% Senior Notes, Series B, due February 15, 2030 (“U.S. Senior Notes,
Series A due 2030”) (together the “U.S. Senior Notes due 2025 and 2030” and with the Euro Senior Notes and the U.S. Senior
Notes 2022 and 2027, the “Senior Notes”) were funded. Interest on the U.S. Senior Notes due 2025 and 2030 will be payable
on February 15 and August 15, commencing on August 15, 2018.
29
The Company was in compliance with its debt covenants as of December 30, 2017, and expects to remain in compliance
based on management’s estimates of operating and financial results for 2017 and the foreseeable future. As of December 30,
2017, the Company met all the conditions required to borrow under the Credit Agreement and management expects the
Company to continue to meet the applicable borrowing conditions.
Acquisitions
During the year ended December 30, 2017, the Company paid $38.5 million, net of cash acquired, for the acquisitions of U.S
Sensor and Monolith. The Company financed the cash portion of the acquisition with a combination of cash on hand and
borrowings under the credit facility.
During the year ended December 31, 2016, the Company paid $417.1 million of total purchase prices, net of cash acquired,
for the acquisitions of the ON Portfolio, Menber’s and PolySwitch. The Company financed the cash portion of these
acquisitions with a combination of cash on hand and borrowings under the credit facility.
During the year ended January 2, 2016, the Company paid $4.6 million, net of cash acquired, substantially all for the
acquisition of Sigmar. The Company financed the cash portion of the acquisition with cash on hand.
Cash Flow Overview
Operating cash inflows are largely attributable to sales of the Company’s products. Operating cash outflows are largely
attributable to recurring expenditures for raw materials, labor, rent, interest, taxes and other operating activities.
The following describes the Company’s cash flows for the twelve months ended December 30, 2017 and December 31, 2016
(in millions)
Net cash provided by operating activities ........................................................................ $
Net cash provided used in investing activities ................................................................
Net cash (used in) provided by financing activities .........................................................
Effect of exchange rate changes on cash and cash equivalents ........................................
Increase (decrease) in cash and cash equivalents ......................................................
Cash and cash equivalents at beginning of period ............................................................
Cash and cash equivalents at end of period ............................................................... $
Fiscal Year
2017
2016
269.2 $
(96.1 )
(24.7 )
6.2
154.6
275.1
429.7 $
180.1
(511.2)
284.2
(6.8)
(53.7)
328.8
275.1
Cash flows from Operating Activities
Net cash provided by operating activities was $269.2 million for 2017, compared to $180.1 million during 2016. The increase
in net cash provided by operating activities was primarily driven by higher earnings, lower cash taxes, reduced acquisition
and integration payments and the timing of supplier and customer payments.
Cash flows from Investing Activities
Net cash used in investing activities was $96.1 million for 2017, compared to $511.2 million during 2016. Net cash used for
acquisitions of $38.5 million in 2017 related to the acquisition of a majority stake in Monolith for $14.2 million and the
acquisition of U.S. Sensor for $24.3 million. Net cash used for acquisitions of $471.1 million for 2016 primarily related to
the acquisitions of PolySwitch for $344.5 million, the ON Portfolio for $104.0 million and Menber’s for $19.2 million.
Capital expenditures were $65.9 million, representing an increase of $19.7 million compared to 2016.
Cash flows from Financing Activities
Net cash used in financing activities was $24.6 million for 2017 compared to net cash provided by financing activities of
$284.2 million for 2016. The Company had $149.4 million of proceeds from the credit facility and senior notes payable and
$134.7 million of payments on the term loan and credit facility in 2017 as compared to $718.4 million of proceeds from the
credit facility and term loan and $421.2 million of payments on the term loan and credit facility. Additionally, dividends paid
increased $3.8 million from $27.9 million in 2016 to $31.7 million for 2017.
30
The following describes the Company’s cash flows for the twelve months ended December 31, 2016 and January 2, 2016
(in millions)
Net cash provided by operating activities ........................................................................ $
Net cash used in investing activities ................................................................................
Net cash used in financing activities ................................................................................
Effect of exchange rate changes on cash and cash equivalents ........................................
Increase (decrease) in cash and cash equivalents ......................................................
Cash and cash equivalents at beginning of period ............................................................
Cash and cash equivalents at end of period ............................................................... $
Fiscal Year
2016
2015
180.1 $
(511.2 )
284.2
(6.8 )
(53.7 )
328.8
275.1 $
165.8
(44.2)
(67.6)
(22.8)
31.2
297.6
328.8
Cash flows from Operating Activities
Net cash provided by operating activities increased $14.3 million in 2016 compared to 2015. Cash provided by operating
activities in 2016 included $104.5 million in net income, $83.0 million in non-cash adjustments (primarily $53.1 million in
depreciation and amortization) and $7.4 million of unfavorable changes in operating assets and liabilities.
Changes in operating assets and liabilities (including short-term and long-term items) that negatively impacted cash flows in
2016 consisted of changes in accounts receivable ($25.2 million), accrued taxes ($18.1 million) and prepaid expenses and
other ($0.3 million). The increase in accounts receivable reflects increased sales in 2016 compared to the prior year. Positively
impacting cash flows were changes in inventory ($8.5 million), accrued expenses including post-retirement ($2.3 million),
accounts payable ($19.2 million) and accrued payroll and severance ($6.1 million).
Cash flows from Investing Activities
Net cash used in investing activities increased $467.1 million in 2016 compared to 2015 primarily due to the acquisitions of
PolySwitch ($344.5 million, net of cash acquired), the ON portfolio business ($104.0 million), and Menber’s ($19.2 million).
Cash flows from Financing Activities
Net cash provided by financing activities increased $351.9 million in 2016 compared to 2015. The increase was primarily
due to an increase in net proceeds from debt of $314.8 million in 2016 compared to 2015. In March the company replaced
its credit agreement with a new agreement and in December the company received proceeds from the issuance of senior
notes. Also contributing to the increase in comparative periods was the use of cash for the share repurchase in 2015 of $31.3
million. Information regarding the company’s debt is provided in Note 6, Debt, of the Notes to Consolidated Financial
Statements included in this Annual Report.
Capital Resources
The Company expends capital to support its operating and strategic plans. Such expenditures include strategic acquisitions,
investments to maintain capital assets, develop new products or improve existing products, and to enhance capacity or
productivity. Many of the associated projects have long lead-times and require commitments in advance of actual spending.
Share Repurchase Program
The Company’s Board of Directors authorized the repurchase of up to 1,000,000 shares of the Company’s common stock
under a program for the period May 1, 2017 to April 30, 2018. The Company did not repurchase any shares of its common
stock during fiscal 2017 and the full 1,000,000 shares may yet be purchased under the program as of December 30, 2017.
31
Contractual Obligations and Commitments
The following table summarizes outstanding contractual obligations and commitments as of December 30, 2017:
(in thousands)
Long-term debt(a) .................................................. $
Interest payments(b) ..............................................
Operating lease payments(c) .................................
Income Tax Obligation(d) .....................................
Purchase obligations(e) ..........................................
Total .............................................................. $
Total
500,492 $
85,973
34,578
35,400
27,600
685,043 $
Less than
1 Year
1 to 3
Years
6,250 $
11,809
10,842
3,400
27,600
59,901 $
12,500 $
22,697
11,619
6,000
—
52,816 $
3 to 5
Years
128,750 $
20,597
8,096
6,000
—
163,443 $
Greater
than
5 Years
352,992
30,870
5,021
20,000
—
408,883
(a) Excludes offsetting issuance costs of $4.9 million. Euro denominated debt amounts are converted based on the Euro to
U.S. Dollar spot rate at year end. Excludes funding of $50 million and $125 million from the U.S Senior Notes, Series
A due 2025 and U.S. Senior Notes, Series A due 2030, respectively, as these occurred subsequent to December 30,
2017. For more information see Note 6, Debt, of the Notes to the Consolidated Financial Statements.
(b) Amounts represent estimated contractual interest payments on outstanding debt. Rates in effect as of December 30,
2017 are used for variable rate debt. For more information see Note 6, Debt, of the Notes to the Consolidated Financial
Statements.
(c) For more information see Note 5, Lease Commitments, of the Notes to the Consolidated Financial Statements.
(d) The Income Tax Obligation represents the current federal and state income tax expense for 2017 including the
preliminary estimate of $49 million for the Toll Charge, partially offset by $13 million of foreign tax credits. The
Company will elect to pay the 2017 current federal income tax over the eight-year period as prescribed by the Tax Act.
For more information see Note 10, Income Taxes, of the Notes to the Consolidated Financial Statements.
(e) Purchase obligations include commitments for capital expenditures not recognized in the Company’s Consolidated
Balance Sheets.
In addition to the above contractual obligations and commitments, the Company had the following obligations at December
30, 2017:
The Company has Company-sponsored defined benefit pension plans covering employees at various non-U.S. subsidiaries
including the U.K., Germany, the Philippines, China, Japan, Mexico, Italy and France. At December 30, 2017, the Company
had a net unfunded status of $19.1 million. The Company expects to make approximately $1.4 million of contributions to the
plans in 2018. For additional information, see Note 8, Benefit Plans, of the Notes to the Consolidated Financial Statements.
The Company has a non-qualified Supplemental Retirement and Savings Plan which provides additional retirement benefits
for certain management employees and named executive officers by allowing participants to defer a portion of their annual
compensation. As of December 30, 2017, there was $8.0 million of accrued compensation benefits included in Other long-
term liabilities. For additional information, see Note 8, Benefit Plans, of the Notes to the Consolidated Financial Statements.
As of December 30, 2017, the Company recognized various accruals related to employee compensation including its annual
incentive program that are expected to be paid in 2018.
Due to the uncertainty with respect to the cash outflows, the preceding table excludes unrecognized tax benefits of $7.7
million. The Company does not expect to make significant payments of these liabilities within the next year. For additional
information, see Note 10, Income Taxes, of the Notes to the Consolidated Financial Statements.
Off-Balance Sheet Arrangements
As of December 30, 2017, the Company did not have any off-balance sheet arrangements, as defined under SEC rules.
Specifically, the Company was not liable for guarantees of indebtedness owed by third parties, the Company was not directly
liable for the debt of any unconsolidated entity and the Company did not have any retained or contingent interest in assets.
32
The Company does not participate in transactions that generate relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured finance or special purpose entities.
Recent Accounting Pronouncements
Recently issued accounting standards and their estimated effect on the Company’s Consolidated Financial Statements are
described in Note 1, Summary of Significant Accounting Policies and Other Information, of the Notes to the Consolidated
Financial Statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to market risk from changes in interest rates, foreign exchange rates and commodity prices.
Interest Rates
The Company had $122.5 million in debt outstanding at December 30, 2017 related to the unsecured revolving credit facility
and term loan. Because 100% of this debt has variable interest rates, the Company is subject to future interest rate fluctuations
in relation to these borrowings which could potentially have a negative impact on cash flows of the Company. A prospective
increase of 100 basis points in the interest rate applicable to the Company’s outstanding borrowings under its credit facility
would result in an increase of approximately $1.2 million in annual interest expense. The Company is not party to any
currency exchange or interest rate protection agreements as of December 30, 2017.
Foreign Exchange Rates
The majority of the company’s operations consist of manufacturing and sales activities in foreign countries. The company
has manufacturing facilities in the U.S., Mexico, Canada, China, Italy, Lithuania, Japan and the Philippines. During 2017,
sales to customers outside the U.S. were approximately 69% of total net sales. During 2016, sales to customers outside the
U.S. were approximately 66% of total net sales. Substantially all sales in Europe are denominated in euros and substantially
all sales in the Asia-Pacific region are denominated in U.S. dollars, Japanese yen, Korean won, Chinese renminbi or
Taiwanese dollars.
The company’s foreign exchange exposures result primarily from inter-company loans, external borrowings, sale of products
in foreign currencies, foreign currency denominated purchases, employee-related and other costs of running operations in
foreign countries. The company’s most significant net long exposures are to the Philippine peso and the euro. The company’s
most significant net short exposures are to the Chinese renminbi, Mexican peso, and Philippine peso. Changes in foreign
exchange rates could affect the company’s sales, costs, balance sheet values and earnings.
At December 30, 2017, the net value of the Company’s assets with exposure to foreign currency risk was approximately $298
million, with the largest exposure being U.S. Dollar denominated inter-company loans with a Philippine peso functional
currency subsidiary. The reduction in earnings from a hypothetical instantaneous 10% adverse change in quoted foreign
currency spot rates applied to foreign currency sensitive asset instruments would be $30 million at December 30, 2017. At
December 30, 2017, the net value of the Company’s liabilities with exposure to foreign currency risk was $204 million, with
the largest exposure being U.S. Dollar denominated inter-company loans with a euro functional currency subsidiary. The
reduction in earnings from a hypothetical instantaneous 10% adverse change in quoted foreign currency spot rates applied to
foreign currency sensitive liability instruments would be $20 million at December 30, 2017. As a result of the mix in
currencies impacting the hypothetical 10% changes, the movements in some instruments would offset movements in other
instruments reducing the hypothetical exposure to the Company.
Commodity Prices
The Company uses various metals in the manufacturing of its products, including copper, zinc, tin, gold, and silver. Prices of
these commodities can and do fluctuate significantly, which can impact the Company’s earnings. The most significant of
these exposures is to copper, zinc, gold, and silver, where at current prices and volumes, a 10% price change would affect
annual pre-tax profit by approximately $3.9 million for copper, $1.5 million for zinc, $0.2 million for gold, $0.8 million for
silver, and $0.6 million for tin.
The cost of oil has fluctuated dramatically over the past several years. Consequently, there is a risk that a return to high prices
for oil and electricity in 2018 could have a significant impact on the Company’s transportation and utility expenses.
33
While the Company is exposed to significant changes in certain commodity prices and foreign currency exchange rates, the
Company actively monitors these exposures and may take various actions from time to time to mitigate any negative impacts
of these exposures.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index
Page
Report of Independent Registered Public Accounting Firm – Consolidated Financial Statements ..............................
Report of Independent Registered Public Accounting Firm – Internal Control Over Financial Reporting ...................
Consolidated Financial Statements
Consolidated Balance Sheets .............................................................................................................................
Consolidated Statements of Net Income ...........................................................................................................
Consolidated Statements of Comprehensive Income ........................................................................................
Consolidated Statements of Cash Flows ...........................................................................................................
Consolidated Statements of Equity ...................................................................................................................
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies and Other Information ...........................................................
2. Acquisitions and Divestitures ........................................................................................................................
3. Inventories .....................................................................................................................................................
4. Goodwill and Other Intangible Assets ...........................................................................................................
5. Lease Commitments ......................................................................................................................................
6. Debt ...............................................................................................................................................................
7. Fair Value of Assets and Liabilities ..............................................................................................................
8. Benefit Plans .................................................................................................................................................
9. Shareholders’ Equity .....................................................................................................................................
10. Income Taxes ..............................................................................................................................................
11. Earnings Per Share ......................................................................................................................................
12. Segment Information ...................................................................................................................................
13. Selected Quarterly Financial Data (Unaudited) ...........................................................................................
35
36
37
38
38
39
40
41
48
54
54
56
56
59
60
65
66
70
70
73
34
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Littelfuse, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Littelfuse, Inc. (a Delaware corporation) and subsidiaries
(the “Company”) as of December 30, 2017 and December 31, 2016, the related consolidated statements of net income,
comprehensive income, equity, and cash flows for each of the three years in the period ended December 30, 2017, and the
related notes and schedule (collectively referred to as the “financial statements”). In our opinion, the financial statements
present fairly, in all material respects, the financial position of the Company as of December 30, 2017 and December 31,
2016, and the results of its operations and its cash flows for each of the three years in the period ended December 30, 2017,
in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of December 30, 2017, based on criteria established
in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”), and our report dated February 23, 2018, expressed an unqualified opinion on those financial
statements.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether
due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2014.
Chicago, Illinois
February 23, 2018
35
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Littelfuse, Inc.
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Littelfuse, Inc. (a Delaware corporation) and subsidiaries (the
“Company”) as of December 30, 2017, based on criteria established in the 2013 Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 30, 2017, based on
criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 30, 2017, and our
report dated February 23, 2018 expressed an unqualified opinion on those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Report on Internal Control over Financial Reporting (“Management’s Report”). Our responsibility is to express an opinion
on the Company’s internal control over financial reporting based on our audit.
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ GRANT THORNTON LLP
Chicago, Illinois
February 23, 2018
36
CONSOLIDATED BALANCE SHEETS
December 30,
2017
December 31,
2016
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents ........................................................................................... $
Short-term investments ................................................................................................
Trade receivables, less allowances (2017 - $27,516; 2016 - $25,874) ........................
Inventories ...................................................................................................................
Prepaid income taxes and income taxes receivable .....................................................
Prepaid expenses and other current assets ...................................................................
Total current assets ..........................................................................................................
Property, plant, and equipment:
Land .............................................................................................................................
Buildings ......................................................................................................................
Equipment ....................................................................................................................
Accumulated depreciation and amortization ................................................................
Net property, plant, and equipment .................................................................................
Intangible assets, net of amortization ..............................................................................
Goodwill ..........................................................................................................................
Investments .....................................................................................................................
Deferred income taxes .....................................................................................................
Other assets .....................................................................................................................
Total assets ...................................................................................................................... $
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable ......................................................................................................... $
Accrued payroll ...........................................................................................................
Accrued expenses ........................................................................................................
Accrued severance .......................................................................................................
Accrued income taxes ..................................................................................................
Current portion of long-term debt ................................................................................
Total current liabilities ....................................................................................................
Long-term debt, less current portion ...............................................................................
Deferred income taxes .....................................................................................................
Accrued post-retirement benefits ....................................................................................
Other long-term liabilities ...............................................................................................
Shareholders’ equity:
Common stock, par value $0.01 per share: 34,000,000 shares authorized; shares
issued, 2017 –22,713,198; 2016 –22,626,922 ..........................................................
Treasury stock, at cost: 439,598 and 409,115 shares, respectively ..............................
Additional paid-in capital ...........................................................................................
Accumulated other comprehensive income ................................................................
Retained earnings .........................................................................................................
Littelfuse, Inc. shareholders’ equity ................................................................................
Non-controlling interest ..................................................................................................
Total equity .....................................................................................................................
Total liabilities and equity ............................................................................................... $
See accompanying Notes to Consolidated Financial Statements.
429,676 $
35
182,699
140,789
1,689
37,452
792,340
9,547
86,599
505,838
(351,407 )
250,577
203,850
453,414
10,993
11,858
17,070
1,740,102 $
101,844 $
49,962
48,994
1,459
16,285
6,250
224,794
489,361
17,069
18,742
62,580
275,124
3,690
176,032
114,063
11,671
31,501
612,081
9,268
80,553
439,542
(312,188)
217,175
213,027
403,544
13,933
20,585
10,849
1,491,194
90,712
42,810
36,138
2,785
8,846
6,250
187,541
447,892
7,066
13,398
20,366
229
(41,294 )
310,012
(63,668 )
722,140
927,419
137
927,556
1,740,102 $
228
(36,510)
291,258
(74,579)
634,391
814,788
143
814,931
1,491,194
37
CONSOLIDATED STATEMENTS OF NET INCOME
(in thousands, except per share data)
December 30,
2017
Year Ended
December 31,
2016
January 2,
2016
Net sales ............................................................................................. $
Cost of sales .......................................................................................
Gross profit .........................................................................................
1,221,534 $
715,001
506,533
1,056,159 $
643,042
413,117
Selling, general, and administrative expenses ....................................
Research and development expenses ..................................................
Pension settlement expenses ..............................................................
Amortization of intangibles ...............................................................
Impairment of goodwill and intangible assets ....................................
Total operating expenses ....................................................................
Operating income ...............................................................................
Interest expense ..................................................................................
Foreign exchange loss (gain) ..............................................................
Other (income) expense, net ...............................................................
Income before income taxes ...............................................................
Income taxes .......................................................................................
Net income ......................................................................................... $
212,833
50,489
—
24,700
—
288,022
218,511
13,380
2,376
(1,282)
204,037
84,518
119,519 $
206,129
42,198
—
19,337
14,809
282,473
130,644
8,628
472
(1,730 )
123,274
18,786
104,488 $
867,864
537,365
330,499
153,714
30,802
29,928
11,898
—
226,342
104,157
4,091
(1,465)
(5,417)
106,948
26,082
80,866
Income per share:
Basic ............................................................................................... $
Diluted ............................................................................................ $
5.27 $
5.21 $
4.63 $
4.60 $
3.58
3.56
Weighted-average shares and equivalent shares outstanding:
Basic ...............................................................................................
Diluted ............................................................................................
22,687
22,931
22,559
22,727
22,565
22,719
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
December 30,
2017
Year Ended
December 31,
2016
January 2,
2016
Net income ......................................................................................... $
Other comprehensive income (loss):
Pension and postemployment liability adjustments net of tax
119,519 $
104,488 $
80,866
expense (benefit) of $535, ($1,302) and ($106), respectively .....
1,235
(3,673 )
(1,761)
Pension and postemployment reclassification adjustments net of
tax (benefit) expense of ($150), $0 and $746, respectively .........
Unrealized (loss) gain on investments ...........................................
Reclassification of pension settlement costs to expense net of tax
(88)
(974)
expense of $11,742 in 2015 .........................................................
Foreign currency translation adjustments ......................................
Comprehensive income ...................................................................... $
—
10,738
130,430 $
412
(815 )
—
(24,832 )
75,580 $
1,530
793
21,124
(46,231)
56,321
See accompanying Notes to Consolidated Financial Statements.
38
CONSOLIDATED STATEMENTS OF CASH FLOWS
December 30,
2017
Year Ended
December 31,
2016
January 2,
2016
(in thousands)
OPERATING ACTIVITIES
Net income ......................................................................................... $
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation ....................................................................................
Amortization of intangibles ............................................................
Impairment of goodwill and intangible assets ................................
Provision for bad debts ...................................................................
Non-cash inventory charges ...........................................................
Net loss on pension settlement, net of tax .......................................
Loss on sale of product line ............................................................
Loss on sale of property, plant, and equipment .............................
Stock-based compensation ..............................................................
Excess tax benefit on share-based compensation............................
Deferred income taxes ....................................................................
Changes in operating assets and liabilities:
Accounts receivable .......................................................................
Inventories ......................................................................................
Accounts payable ............................................................................
Accrued expenses (including post-retirement) ...............................
Accrued payroll and severance .......................................................
Accrued taxes .................................................................................
Prepaid expenses and other .............................................................
Net cash provided by operating activities ...........................................
INVESTING ACTIVITIES
Acquisitions of businesses, net of cash acquired ................................
Purchase of cost method investment ..................................................
Proceeds from maturities of short-term investments ..........................
Decrease in entrusted loan ..................................................................
Purchases of property, plant, and equipment ......................................
Proceeds from sale of property, plant, and equipment .......................
Net cash used in investing activities ...................................................
FINANCING ACTIVITIES
Proceeds of revolving credit facility ...................................................
Proceeds of term loan .........................................................................
Proceeds of senior notes payable ........................................................
Payments of term loan ........................................................................
Payments of revolving credit facility .................................................
Net (payments) proceeds related to stock-based award activities ......
Proceeds (payments) from entrusted loan ..........................................
Debt issuance costs .............................................................................
Cash dividends paid ..........................................................................
Excess tax benefit on share-based compensation ...............................
Purchases of common stock ...............................................................
Net cash (used in) provided by financing activities ............................
Effect of exchange rate changes on cash and cash equivalents ..........
Increase (decrease) in cash and cash equivalents ...............................
Cash and cash equivalents at beginning of year .................................
Cash and cash equivalents at end of year ........................................... $
See accompanying Notes to Consolidated Financial Statements.
39
119,519 $
104,488 $
80,866
38,311
24,700
—
2,414
1,607
—
—
3,634
16,315
—
17,063
(11,087)
(20,180)
6,494
7,641
3,709
39,276
19,754
269,170
(38,512)
—
3,739
3,599
(65,925)
962
(96,137)
15,000
9,375
125,000
(7,188)
(127,500)
(2,373)
(3,599)
(1,626)
(31,770)
—
—
(24,681)
6,200
154,552
275,124
429,676 $
33,800
19,337
14,809
1,769
7,834
—
1,391
813
11,987
(3,421 )
(5,269 )
(22,779 )
8,539
19,190
2,287
6,131
(18,062 )
(2,711 )
180,133
(471,118 )
—
345
5,510
(46,228 )
248
(511,243 )
367,000
125,000
226,428
(89,688 )
(331,500 )
20,494
(5,510 )
(3,583 )
(27,866 )
3,421
—
284,196
(6,748 )
(53,662 )
328,786
275,124 $
29,701
11,898
—
164
—
19,308
—
1,253
10,266
(1,891)
11,479
(3,397)
(3,577)
2,573
6,482
5,883
557
(5,739)
165,826
(4,558)
(3,500)
—
7,811
(44,019)
102
(44,164)
49,000
—
—
(8,750)
(55,500)
9,150
(7,811)
(42)
(24,341)
1,891
(31,252)
(67,655)
(22,792)
31,215
297,571
328,786
CONSOLIDATED STATEMENTS OF EQUITY
Littelfuse, Inc. Shareholders’ Equity
Addl.
Paid in
Capital
Treasury
Stock
Accum.
Other
Comp.
Inc.
(Loss)
Retained
Earnings
Non-
controlling
Interest
Common
Stock
(in thousands)
Balance at December 27, 2014 ............................. $
Comprehensive income:
Net income for the year ....................................
Pension liability adjustments, net .....................
Pension settlement, net .....................................
Pension and postemployment reclassification
adjustments, net ............................................
Unrealized gain on investments .......................
Foreign currency translation adjustments ........
Comprehensive income ....................................
Stock-based compensation ...................................
Withheld 28,286 shares on restricted share units
for withholding taxes........................................
Retirement of 214,609 shares of treasury stock ...
Purchase of 350K shares of common stock ..........
Stock options exercised, including tax impact of
($2,485) ...........................................................
Cash dividends paid ($1.08 per share) ................
Balance at January 2, 2016 ................................... $
Comprehensive income:
Net income for the year ........................................
Pension and postemployment liability
226 $ 243,844 $ (18,724) $ (21,126) $ 519,956 $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,761)
— 21,124
— 80,866
—
—
1,530
—
—
793
— (46,231)
—
—
—
—
7,782
—
—
—
—
—
(4)
—
—
(1,221)
(2,727)
18,712
(30,027)
—
—
— (18,712)
—
—
Total
143 $ 724,319
— 80,866
—
(1,761)
— 21,124
1,530
—
—
793
— (46,231)
56,321
7,782
—
(2,727)
—
—
—
— (31,252)
—
—
—
2
—
— (24,341)
—
224 $ 243,844 $ (32,766) $ (45,671) $ 557,769 $
9,148
—
—
9,150
— (24,341)
143 $ 739,252
—
—
—
— 104,488
— 104,488
adjustments, net ............................................
—
—
—
(3,673)
—
—
(3,673)
Pension and postemployment reclassification
adjustments, net ............................................
Unrealized (loss) on investments .....................
Foreign currency translation adjustments .........
Comprehensive income ....................................
Stock-based compensation ...................................
Withheld 31,040 shares on restricted share units
—
—
—
—
—
—
412
—
—
(815)
— (24,832)
—
—
—
—
7,471
—
—
—
412
—
—
(815)
— (24,832)
75,580
7,471
—
for withholding taxes........................................
—
—
(3,744)
—
—
—
(3,744)
Stock options exercised, including tax impact of
($7,400) ...........................................................
Cash dividends paid ($1.24 per share) ................
Balance at December 31, 2016 ............................. $
Comprehensive income:
Net income for the year ........................................
Pension and postemployment liability
4 24,234
—
—
—
— (27,866)
—
—
—
228 $ 291,258 $ (36,510) $ (74,579) $ 634,391 $
— 24,238
— (27,866)
143 $ 814,931
—
—
—
— 119,519
— 119,519
adjustments, net ............................................
—
—
—
1,235
—
—
1,235
Pension and postemployment reclassification
adjustments, net ............................................
Unrealized gain (loss) on investments ..............
Foreign currency translation adjustments ........
Comprehensive income ...................................
Stock-based compensation ...................................
Non-controlling interest .......................................
Withheld 30,459 shares on restricted share units
for withholding taxes........................................
Stock options exercised ........................................
Cash dividends paid ($1.40 per share) ................
Balance at December 30, 2017 ............................. $
—
—
—
—
—
—
(88)
—
—
(974)
— 10,738
— 16,315
—
—
—
—
—
—
—
—
—
—
—
—
—
(4,784)
—
—
—
—
1
—
— (31,770)
—
229 $ 310,012 $ (41,294) $ (63,668) $ 722,140 $
—
2,439
—
(88)
—
—
(974)
— 10,738
130,430
— 16,315
(6)
(6)
(4,784)
—
—
2,440
— (31,770)
137 $ 927,556
See accompanying Notes to Consolidated Financial Statements.
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies and Other Information
Nature of Operations
Littelfuse, Inc. and subsidiaries (the “Company”) is a global leader in circuit protection products with advancing platforms
in power control and sensor technologies, serving customers in the electronics, automotive, and industrial markets. With a
diverse and extensive product portfolio of fuses, semiconductors, polymers, ceramics, relays and sensors, the Company works
with its customers to build safer, more reliable and more efficient products for the connected world in virtually every market
that uses electrical energy, ranging across consumer electronics, IT and telecommunication applications, industrial
electronics, automobiles and other transportation, and heavy industrial applications. The Company has a network of global
engineering centers and labs that develop new products and product enhancements, provides customer application support
and test products for safety, reliability, and regulatory compliance.
Fiscal Year
References herein to “2017”, “fiscal 2017” or “fiscal year 2017” refer to the fiscal year ended December 30, 2017. References
herein to “2016”, “fiscal 2016” or “fiscal year 2016” refer to the fiscal year ended December 31, 2016. References herein to
“2015”, “fiscal 2015” or “fiscal year 2015” refer to the fiscal year ended January 2, 2016. The Company operates on a 52-53
week fiscal year (4-4-5 basis) ending on the Saturday closest to December 31. Therefore, the financial results of certain fiscal
years and the associated 14 week quarters will not be exactly comparable to the prior and subsequent 52 week fiscal years
and the associated quarters having only 13 weeks. As a result of using this convention, each of fiscal 2017 and fiscal 2016
contained 52 weeks whereas fiscal 2015 contained 53 weeks.
Basis of Presentation
The Consolidated Financial Statements include the accounts of Littelfuse, Inc. and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated. The company’s Consolidated Financial Statements were
prepared in accordance with generally accepted accounting principles in the United States of America and include the assets,
liabilities, sales and expenses of all wholly-owned subsidiaries and majority-owned subsidiaries over which the Company
exercises control.
Use of Estimates
The process of preparing financial statements in conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts of assets and liabilities at the date of the Consolidated
Financial Statements, and the reported amounts of revenues and expenses and the accompanying notes. The Company
evaluates and updates its assumptions and estimates on an ongoing basis and may employ outside experts to assist in its
evaluation, as considered necessary. Actual results could differ from those estimates.
Cash Equivalents
All highly liquid investments, with an original maturity of three months or less when purchased, are considered to be cash
equivalents.
Short-Term and Long-Term Investments
As of December 30, 2017, the Company had an investment in Polytronics Technology Corporation Ltd. (“Polytronics”). The
Company’s Polytronics shares held at the end of fiscal 2017 and 2016 represent approximately 7.2% of total Polytronics
shares outstanding. The Polytronics investment is classified as available-for-sale and is carried at fair value with the
unrealized gains and losses reported as a component of “Accumulated Other Comprehensive Income (Loss).” The fair value
of the Polytronics investment was €9.2 million (approximately $11.0 million) at December 30, 2017 and €10.0 million
(approximately $10.4 million) at December 31, 2016. Included in 2017 and 2016, other comprehensive income are unrealized
losses of $1.0 million and $0.8 million, respectively, due to changes in fair market value of the Polytronics investment. The
remaining movement year over year was due to the impact of changes in exchange rates.
The Company has certain investment securities that are classified as available-for-sale. Available-for-sale securities are
carried at fair value with the unrealized gains and losses reported as a component of “Accumulated Other Comprehensive
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income (Loss).” Realized gains and losses and declines in unrealized value judged to be other-than-temporary on available-
for-sale securities are included in other expense (income), net. The cost of securities sold is based on the specific identification
method. Interest and dividends on securities classified as available-for-sale are included in interest income. Short-term
investments, which are primarily certificates of deposits, are carried at cost which approximates fair value.
The Company has investments related to its non-qualified Supplemental Retirement and Savings Plan. The Company
maintains accounts for participants through which participants make investment elections. The investment securities are
subject to the claims of the Company’s creditors. The investment securities are all mutual funds with readily determinable
fair values and are classified as trading securities. The investment securities are measured at fair value with unrealized gains
and losses recognized in earnings. As of December 30, 2017, there was $8.0 million of marketable securities related to the
plan included in Other assets on the Consolidated Balance Sheets.
Trade Receivables
The Company performs credit evaluations of customers’ financial condition and generally does not require collateral. Credit
losses are provided for in the financial statements based upon specific knowledge of a customer’s inability to meet its financial
obligations to the Company. Historically, credit losses have consistently been within management’s expectations and have
not been a material amount. A receivable is considered past due if payments have not been received within agreed upon
invoice terms. Write-offs are recorded at the time a customer receivable is deemed uncollectible.
The Company also maintains allowances against accounts receivable for the settlement of rebates and sales discounts to
customers. These allowances are based upon specific customer sales and sales discounts as well as actual historical
experience.
Inventories
Inventories are stated at the lower of cost or net realizable value, which approximates current replacement cost. Cost is
principally determined using the first-in, first-out method. The Company maintains excess and obsolete allowances against
inventory to reduce the carrying value to the expected net realizable value. These allowances are based upon a combination
of factors including historical sales volume, market conditions, lower of cost or market analysis and expected realizable value
of the inventory.
Property, Plant, and Equipment
Land, buildings, and equipment are carried at cost. Depreciation is calculated using the straight-line method with useful lives
of 21 years for buildings, seven to nine years for equipment, seven years for furniture and fixtures, five years for tooling and
three years for computer equipment. Leasehold improvements are depreciated over the lesser of their useful life or the lease
term. Maintenance and repair costs are charged to expense as incurred. Major overhauls that extend the useful lives of existing
assets are capitalized.
Goodwill
The Company annually tests goodwill for impairment on the first day of its fiscal fourth quarter, or more frequently if an
event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its
carrying value.
The Company compares each reporting unit’s fair value, estimated based on comparable company market valuations and
expected future discounted cash flows to be generated by the reporting unit, to its carrying value. For the seven reporting
units with goodwill, the Company compared the estimated fair value of each reporting unit to its carrying value. The results
of the goodwill impairment test as of October 1, 2017 indicated that the estimated fair values for each of the seven reporting
units exceeded their respective carrying values. As of the most recent annual test conducted on October 1, 2017, the Company
noted that the excess of fair value over the carrying value, was 161%, 314%, 247%, 218%, 100%, 25%, and 248% for its
reporting units; Electronics (non-silicon), Electronics (silicon), Passenger Car, Commercial Vehicle Products, Sensors,
Relays, and Power Fuse, respectively. Relatively small changes in the Company’s key assumptions would not have resulted
in any reporting units failing the goodwill impairment test. See Note 4, Goodwill and Other Intangible Assets, for additional
information.
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company also performs an interim review for indicators of impairment each quarter to assess whether an interim
impairment review is required for any reporting unit. As part of its interim reviews, management analyzes potential changes
in the value of individual reporting units based on each reporting unit’s operating results for the period compared to expected
results as of the prior year’s annual impairment test. In addition, management considers how other key assumptions, including
discount rates and expected long-term growth rates, used in the last annual impairment test, could be impacted by changes in
market conditions and economic events. Based on the interim assessments as of December 30, 2017, management concluded
that no events or changes in circumstances indicated that it was more likely than not that the fair value for any reporting unit
had declined below its carrying value.
Long-Lived Assets
Customer relationships, trademarks and tradenames are amortized using the straight-line method over estimated useful lives
that have a range of five to 20 years. Patents, licenses and software are amortized using the straight-line method or an
accelerated method over estimated useful lives that have a range of five to 17 years. The distribution networks are amortized
on either a straight-line or accelerated basis over estimated useful lives that have a range of three to 20 years.
The Company assesses potential impairments to its long-lived assets if events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. An impaired asset is written down to its estimated fair value based upon
the most recent information available. Estimated fair market value is generally measured by discounting estimated future
cash flows. Long-lived assets, other than goodwill and other intangible assets, that are held for sale are recorded at the lower
of carrying value or the fair market value less the estimated cost to sell.
During the year ended December 31, 2016, the Company recognized non-cash impairment charges totaling $6.0 million, of
which $2.2 million related to the impairment of certain customer relationship intangible assets in the customs reporting unit
within the Industrial segment and $3.8 million related to the impairment of the Custom Products tradename. The impairment
of the customer relationship intangible assets resulted from lower expectations of future revenue to be derived from those
relationships while the tradename impairment resulted from lower expectations of future cash flows of the customs reporting
unit.
Environmental Liabilities
Environmental liabilities are accrued based on engineering studies estimating the cost of remediating sites. Expenses related
to on-going maintenance of environmental sites are expensed as incurred. If actual or estimated probable future losses exceed
the Company’s recorded liability for such claims, the Company would record additional charges during the period in which
the actual loss or change in estimate occurred.
Pension and Other Post-retirement Benefits
The Company records annual income and expense amounts relating to its pension and post-retirement benefits plans based
on calculations which include various actuarial assumptions including discount rates, expected long-term rates of return and
compensation increases. The Company reviews its actuarial assumptions on an annual basis as of the fiscal year-end balance
sheet date (or more frequently if a significant event requiring remeasurement occurs) and modifies the assumption based on
current rates and trends when it is appropriate to do so. The effects of modifications are recognized immediately on the
Consolidated Balance Sheets, but are generally amortized into operating earnings over future periods, with the deferred
amount recorded in accumulated other comprehensive income (loss). The Company believes that the assumptions utilized in
recording its obligations under its plans are reasonable based on its experience, market conditions and input from its actuaries
and investment advisors.
Revenue Recognition
The Company recognizes revenue on product sales in the period in which the sales process is complete. This generally occurs
when persuasive evidence of an arrangement exists, products are shipped (FOB origin) to the customer in accordance with
the terms of the sale, the risk of loss has been transferred, collectability is reasonably assured, and the pricing is fixed and
determinable.
At the end of each period, for those shipments where title to the products and the risk of loss and rewards of ownership do
not transfer until the product has been received by the customer, the Company adjusts revenues and cost of sales for the delay
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
between the time that the products are shipped and when they are received by the customer. The Company’s distribution
channels are primarily through direct sales and independent third-party distributors.
Revenue and Billing
The Company generally accepts orders from customers based on long term purchasing contracts and written sales agreements.
Contract pricing and selling agreement terms are based on market factors, costs, and competition. Pricing normally is
negotiated as an adjustment (premium or discount) from the Company’s published price lists. The customer is invoiced when
the Company’s products are shipped to them in accordance with the terms of the sales agreement.
Returns and Credits
Some of the terms of the Company’s sales agreements and normal business conditions provide customers (distributors) the
ability to receive price adjustments on products previously shipped and invoiced. This practice is common in the industry and
is referred to as a “ship and debit” program. This program allows the distributor to debit the Company for the difference
between the distributors’ contracted price and a lower price for specific transactions. Under certain circumstances (usually in
a competitive situation or large volume opportunity), a distributor will request authorization to reduce its price to its buyer.
If the Company approves such a reduction, the distributor is authorized to “debit” its account for the difference between the
contracted price and the lower approved price. The Company establishes reserves for this program based on historic activity
and actual authorizations for the debit and recognizes these debits as a reduction of revenue.
Return to Stock
The Company has a return to stock policy whereby a customer with prior authorization from Littelfuse management can
return previously purchased goods for full or partial credit. The Company establishes an estimated allowance for these returns
based on historic activity. Sales revenue and cost of sales are reduced to anticipate estimated returns.
Volume Rebates
The Company offers incentives to certain customers to achieve specific quarterly or annual sales targets. If customers achieve
their sales targets, they are entitled to rebates. The Company estimates the future cost of these rebates and recognizes this
estimated cost as a reduction to revenue as products are sold.
Allowance for Doubtful Accounts
The Company evaluates the collectability of its trade receivables based on a combination of factors. The Company regularly
analyzes its significant customer accounts and, when the Company becomes aware of a specific customer’s inability to meet
its financial obligations, the Company records a specific reserve for bad debt to reduce the related receivable to the amount
the Company reasonably believes is collectible. The Company also records allowances for all other customers based on a
variety of factors including the length of time the receivables are past due, the financial health of the customer,
macroeconomic considerations and past experience. Accounts receivable balances that are deemed to be uncollectible, are
written off against the reserve on a case-by-case basis. Historically, the allowance for doubtful accounts has been adequate
to cover bad debts. If circumstances related to specific customers change, the estimates of the recoverability of receivables
could be further adjusted. However, due to the Company’s diverse customer base and lack of credit concentration, the
Company does not believe its estimates would be materially impacted by changes in its assumptions.
Advertising Costs
The Company expenses advertising costs as incurred, which amounted to $2.9 million in both 2017 and 2016 and $2.3 million
in 2015, respectively, and are included as a component of selling, general, and administrative expenses.
Shipping and Handling Fees and Costs
Amounts billed to customers related to shipping and handling is classified as revenue. Costs incurred for shipping and
handling of $10.9 million $9.1 million, and $7.0 million in 2017, 2016, and 2015, respectively, are classified in selling,
general, and administrative expenses.
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Foreign Currency Translation / Remeasurement
The Company’s foreign subsidiaries use the local currency or the U.S. dollar as their functional currency, as appropriate.
Assets and liabilities are translated using exchange rates at the balance sheet date, and revenues and expenses are translated
at weighted average rates. The amount of foreign currency gain or loss from remeasurement recognized in the income
statement was a loss of $2.4 million in 2017, a loss of $0.5 million in 2016, and a gain of $1.5 million in 2015. Adjustments
from the translation process are recognized in “Shareholders’ equity” as a component of “Accumulated other comprehensive
income.”
Stock-based Compensation
The Company recognizes compensation expense for the cost of awards of equity compensation using a fair value method.
Benefits of tax deductions in excess of recognized compensation expense are reported as operating cash flows. See Note 9,
Shareholders’ Equity, for additional information on stock-based compensation.
Coal Mining Liability
Included in other long-term liabilities is an accrual related to former coal mining operations at Littelfuse GmbH (formerly
known as Heinrich Industries, AG) for the amounts of €0.9 million ($1.1 million) and €1.4 million ($1.5 million) at December
30, 2017 and December 31, 2016, respectively. Management, in conjunction with an independent third-party, performs an
annual evaluation of the former coal mining operations in order to develop an estimate of the probable future obligations in
regard to remediating the dangers (such as a shaft collapse) of abandoned coal mine shafts in the former coal mining
operations. Management accrues for costs associated with such remediation efforts based on management's best estimate
when such costs are probable and reasonably able to be estimated. The ultimate determination can only be done after
respective investigations because the concrete conditions are mostly unknown at this time. The accrual is not discounted as
management cannot reasonably estimate when such remediation efforts will take place.
Other Expense (Income), Net
Other expense (income), net generally consists of interest income, royalties, and non-operating income.
Income Taxes
The Company accounts for income taxes using the liability method. Deferred taxes are recognized for the future effects of
temporary differences between financial and income tax reporting using enacted tax rates in effect for the years in which the
differences are expected to reverse. The Company recognizes deferred taxes for temporary differences, operating loss
carryforwards and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance if it is more likely than
not that some portion, or all, of the deferred tax assets will not be realized. U.S. state and non-U.S. income taxes are provided
on the portion of non-U.S. income that is expected to be remitted to the U.S. and be taxable (and non-U.S. income taxes are
provided on the portion of non-U.S. income that is expected to be remitted to an upper-tier non-U.S. entity). Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Deferred U.S. income taxes and non-U.S. taxes are not provided on the excess of the investment value for financial reporting
over the tax basis of investments in those non-U.S. subsidiaries for which such excess is considered to be permanently
reinvested in those operations. Management regularly evaluates whether non-U.S. earnings are expected to be permanently
reinvested. This evaluation requires judgment about the future operating and liquidity needs of the Company’s foreign
subsidiaries. Changes in economic and business conditions, non-U.S. or U.S. tax laws, or the Company’s financial situation
could result in changes to these judgments and the need to record additional tax liabilities.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position
will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits
recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than
50% likelihood of being realized upon ultimate settlement.
On December 22, 2017, the U.S. enacted legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act").
Among other things, the Tax Act reduces the U.S. corporate federal income tax rate from 35% to 21%, adds base broadening
provisions which limit deductions and address excessive international tax planning, imposes a one-time tax (the “Toll
45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Charge”) on accumulated earnings of certain non-U.S. subsidiaries and enables repatriation of earnings of non-U.S.
subsidiaries free of U.S. federal income tax. Other than the Toll Charge (which is applicable to the Company for 2017), the
provisions will generally be applicable to the Company in 2018 and beyond.
In accordance with the guidance provided in SEC Staff Accounting Bulletin (“SAB”) No. 118, in the fourth quarter of 2017
the Company recorded a charge of $47 million as a provisional reasonable estimate of the impact of the Tax Act, including
$49 million for the Toll Charge net of $2 million for other net tax benefits. The Company is continuing to analyze the Tax
Act and plans to finalize the estimate within the measurement period outlined in SAB No.118. The final charge may differ
from the provisional reasonable estimate if provisions of the Tax Act, and their interaction with other provisions of the U.S.
Internal Revenue Code, are interpreted differently than interpretations made by the Company in determining the estimate,
whether through issuance of administrative guidance, or through further review of the Tax Act by the Company and its
advisors. Aside from these interpretation issues, the final charge may differ from the provisional reasonable estimate due to
refinements of accumulated non-U.S. earnings and tax pool data.
One of the base broadening provisions of the Tax Act is commonly referred to as the global intangible low-taxed income
“GILTI” provisions. In accordance with guidance issued by the FASB staff, the Company has not adopted an accounting
policy for GILTI. Thus, the U.S. balance sheet tax accounts, notably deferred taxes, were computed without consideration of
the possible future impact of the GILTI provisions. The Company intends to adopt an accounting policy for GILTI within the
measurement period outlined in SAB 118.
Fair Value Measurements
Certain assets and liabilities are required to be recorded at fair value on a recurring basis. Fair value is determined based on
the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between market participants. The Company records
the fair value of its available-for-sale securities and pension plan assets on a recurring basis. Assets measured at fair value on
a nonrecurring basis include long-lived assets held and used, long-lived assets held for sale, goodwill and other intangible
assets. The fair value of cash and cash equivalents, accounts receivable, short-term debt and accounts payable approximate
their carrying values. The three-tier value hierarchy, which prioritizes valuation methodologies based on the reliability of the
inputs, is:
Level 1 – Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2 – Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices
for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in
markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3 – Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with
reasonably available assumptions made by other market participants.
Reclassifications
Certain reclassifications of prior year amounts for Trade receivables, net and Prepaid expenses and other current assets were
made to conform to the 2017 presentation.
Recently Adopted Accounting Standards
In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-
11 – “Inventory (Topic 330): Simplifying the Measurement of Inventory,” which simplifies the measurement of inventory by
requiring inventory to be measured at the lower of cost and net realizable value. The update is effective for financial
statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The
Company adopted the new standard on January 1, 2017. The adoption of the update did not have a material impact on the
Company’s consolidated financial position and results of operations. As a result of the adoption of the update, inventories are
stated at the lower of cost or net realizable value. Cost is principally determined using the first-in, first-out method. The
Company maintains excess and obsolete allowances against inventory to reduce the carrying value to the expected net
realizable value. These allowances are based upon a combination of factors including historical sales volume, market
conditions, lower of cost or market analysis and expected realizable value of the inventory.
46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In March 2016, the FASB issued ASU No. 2016-09 – “Improvements to Employee Share-Based Payment Accounting,”
which amends ASC 718, “Compensation – Stock Compensation.” The update simplifies several aspects of the accounting for
employee share-based payment transactions, including accounting for income taxes, forfeitures, and statutory withholding
requirements, as well as classification in the Consolidated Statements of Cash Flows. The update is effective for financial
statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The
Company adopted the new standard on January 1, 2017. As a result of the adoption, on a prospective basis, the Company
recognized $2.0 million of excess tax benefits from stock-based compensation as a discrete item in income tax expense for
the year ended December 30, 2017. Historically, these amounts were recorded as additional paid-in capital. The Company
also elected to apply the change prospectively to the Consolidated Statements of Cash Flows. As a result, on a prospective
basis, share-based payments will be reported as operating activities in the Consolidated Statements of Cash Flows. The
Company elected not to change its policy on accounting for forfeitures and will continue to estimate a requisite forfeiture
rate. Additional amendments to the accounting for income taxes and minimum statutory withholding requirements had no
impact on the results of operations.
In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other” (Topic 350). This ASU modifies the
concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to
the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine
goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of
its assets and liabilities as if that reporting unit had been acquired in a business combination. Because the update will eliminate
Step 2 from the goodwill impairment test, it should reduce the cost and complexity of evaluating goodwill for impairment.
This ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2020,
with early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1,
2017. The ASU did not impact the Company in 2017.
Recently Issued Accounting Standards
In October 2016, the FASB issued ASU No. 2016-16, "Income Taxes” (Topic 740). This ASU update requires entities to
recognize the income tax consequences of many intercompany asset transfers at the transaction date. The seller and buyer
will immediately recognize the current and deferred income tax consequences of an intercompany transfer of an asset other
than inventory. The tax consequences were previously deferred. The guidance is effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2017, with early adoption permitted. Adoption will require a modified
retrospective transition, and is not expected to have a material impact.
In March 2016, the FASB issued ASU No. 2016-09 – “Improvements to Employee Share-Based Payment Accounting,”
which amends ASC 718, “Compensation – Stock Compensation.” The update simplifies several aspects of the accounting for
employee share-based payment transactions, including accounting for income taxes, forfeitures, and statutory withholding
requirements, as well as classification in the Consolidated Statements of Cash Flows. The update is effective for financial
statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The
Company adopted the new standard on January 1, 2017. As a result of the adoption, on a prospective basis, the Company
recognized $2.0 million of excess tax benefits from stock-based compensation as a discrete item in income tax expense for
the year ended December 30, 2017. Historically, these amounts were recorded as additional paid-in capital. The Company
also elected to apply the change prospectively to the Consolidated Statements of Cash Flows. As a result, on a prospective
basis, share-based payments will be reported as operating activities in the Consolidated Statements of Cash Flows. The
Company elected not to change its policy on accounting for forfeitures and will continue to estimate a requisite forfeiture
rate. Additional amendments to the accounting for income taxes and minimum statutory withholding requirements had no
impact on the results of operations.
In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments-Recognition and Measurement of Financial
Assets and Financial Liabilities” which addresses certain aspects of the recognition, measurement, presentation and disclosure
of financial instruments. The ASU will require the Company to recognize any changes in the fair value of certain equity
investments in net income. These changes are currently recognized in other comprehensive income ("OCI"). This guidance
is effective for interim and fiscal years beginning after December 15, 2017.
In February 2016, the FASB issued ASU No. 2016-02, "Leases" (Topic 842). This ASU requires lessees to recognize, on the
balance sheet, assets and liabilities for the rights and obligations created by leases of greater than twelve months. The
accounting by lessors will remain largely unchanged. The ASU is effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2018, with early adoption permitted. Adoption will require a modified
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
retrospective transition, and the Company plans to adopt the standard in the first quarter of 2019. The Company is currently
evaluating the impact of ASU 2016-02.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (Topic 606) which supersedes
the revenue recognition requirements in ASC 605, “Revenue Recognition.” This ASU provides a single comprehensive model
for entities to use in accounting for revenue arising from contracts with customers and will supersede most current revenue
recognition guidance. The guidance permits two implementation approaches, one requiring retrospective application of the
new standard with restatement of prior years and one requiring prospective application of the new standard with disclosure
of results under old standards. In August, 2015, the FASB issued ASU No. 2015-14, which postponed the effective date of
ASU No. 2014-09 to fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with
early adoption permitted on the original effective date of fiscal years beginning after December 15, 2016. The Company is in
the process of finalizing its assessment and the documentation of its evaluation of the new standard. The majority of the
Company’s revenue arrangements generally consist of a single performance obligation to transfer promised finished goods.
Based on the Company’s evaluation process completed and review of its contracts with customers, the timing and amount of
revenue recognized based on ASU 2015-14 is consistent with its revenue recognition policy under previous guidance. The
Company adopted the new standard effective December 31, 2017, using the modified retrospective approach, and will expand
its consolidated financial statement disclosures in order to comply with the ASU. The Company has determined the adoption
of ASU 2015-14 will not have a material impact on its results of operations, cash flows, or financial position.
2. Acquisitions and Dispositions
The Company accounts for acquisitions using the acquisition method in accordance with ASC 805, “Business Combinations,”
in which assets acquired and liabilities assumed are recorded at fair value as of the date of acquisition. The operating results
of the acquired business are included in the Company’s Consolidated Financial Statements from the date of the acquisition.
Subsequent Event
IXYS Corporation
On January 17, 2018, the Company acquired IXYS Corporation (“IXYS”), a global pioneer in the power semiconductor and
integrated circuit markets with a focus on medium to high voltage power control semiconductors across the industrial,
communications, consumer and medical markets. IXYS has a broad customer base, serving more than 3,500 customers
through its direct sales force and global distribution partners. The acquisition of IXYS is expected to accelerate the Company’s
growth across the power control market driven by IXYS’s extensive power semiconductor portfolio and technology expertise.
With IXYS, the Company will be able to diversify and expand its presence within industrial electronics markets, leveraging
the strong IXYS industrial OEM customer base. The Company also expects to increase long-term penetration of its power
semiconductor portfolio in automotive markets, expanding its global content per vehicle.
The Company has commenced the determination of the purchase price allocation. Upon completion of the acquisition, at
IXYS stockholders’ election and subject to proration, each share of IXYS common stock, par value $0.01 per share, owned
immediately prior to the effective time were cancelled and extinguished and automatically converted into the right to receive:
(i) $23.00 in cash (subject to applicable withholding tax), without interest (referred to as the cash consideration), or (ii) 0.1265
of a share of common stock, par value $0.01 per share, of Littelfuse (referred to as the stock consideration and together with
the cash consideration, the merger consideration). IXYS stockholders received cash in lieu of any fractional shares of
Littelfuse common stock that the IXYS stockholders would otherwise have been entitled to receive. Additionally, each
outstanding option to purchase shares of IXYS common stock granted under an IXYS equity plan were assumed by Littelfuse
and converted into an option to acquire (i) a number of shares of Littelfuse common stock equal to the number of shares of
IXYS common stock subject to such option immediately prior to the effective time multiplied by 0.1265, rounded down to
the nearest whole share, with (ii) an exercise price per share of Littelfuse common stock equal to the exercise price of such
IXYS stock option immediately prior to the effective time divided by 0.1265, rounded up to the nearest whole cent.
Based on the $207.5 per share opening price of Littelfuse common stock on January 17, 2018, the consideration IXYS
stockholders received in exchange of their IXYS common stock in the acquisition had a value of approximately $814.8 million
comprised of $380.5 million of cash and $434.2 million of Littelfuse stock. In addition to the consideration transferred related
to IXYS common stock, the value of consideration transferred, and included in the purchase price, related to IXYS stock
options that were converted to Littelfuse stock options, or cash settled, had a value of approximately $41.7 million. As a
48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
result, total consideration is valued at approximately $856.5 million. The Company is in the process of estimating the purchase
price allocation.
2017 Acquisitions
U.S. Sensor
On July 7, 2017, the Company acquired the assets of U.S. Sensor Corporation (“U.S. Sensor”). The acquisition purchase
price of $24.3 million, net of the finalization of an income tax gross up which was settled in the fourth quarter of 2017, was
funded with available cash. The acquired business expands the Company’s existing sensor portfolio in several key electronics
and industrial end markets. U.S. Sensor manufactures a variety of high quality negative temperature coefficient thermistors
as well as thermistor probes and assemblies. Product lines also include thin film platinum resistance temperature detectors
(“RTDs”) and RTD assemblies.
The following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in
the U.S. Sensor acquisition:
(in thousands)
Total purchase consideration:
Purchase
Price
Allocation
Cash ........................................................................................................................................................ $
24,340
Allocation of consideration to assets acquired and liabilities assumed:
Current assets, net .................................................................................................................................. $
Patented and unpatented technologies ....................................................................................................
Trademarks and tradenames ..................................................................................................................
Non-compete agreement ........................................................................................................................
Customer relationships ...........................................................................................................................
Goodwill.................................................................................................................................................
Current liabilities ....................................................................................................................................
$
4,635
1,090
200
50
2,830
16,075
(540)
24,340
Included in U.S. Sensor’s current assets, net was approximately $1.5 million of receivables. All U.S. Sensor goodwill, other
assets and liabilities were recorded in the Electronics segment and reflected in the United States geographic area. The goodwill
resulting from this acquisition consists largely of the Company’s expected future product sales and synergies from combining
U.S. Sensor’s products and technology with the Company’s existing electronics product portfolio. Goodwill for the above
acquisition is expected to be deductible for tax purposes.
As required by purchase accounting rules, the Company recorded a $1.6 million step-up of inventory to its fair value as of
the acquisition date based on the preliminary valuation. The step-up was amortized as a non-cash charge to cost of goods sold
during the third quarter of 2017, as the acquired inventory was sold, and reflected as other non-segment costs.
Monolith
In December 2015, the Company invested $3.5 million in the preferred stock of Monolith Semiconductor Inc. (“Monolith”),
a U.S. start-up Company developing silicon carbide technology, which represented approximately 12% of the common stock
of Monolith on an as-converted basis. The Company accounted for its investment in Monolith under the cost method with
any changes in value recorded in other comprehensive income. The value of the Monolith investment was $3.5 million at
December 31, 2016.
On February 28, 2017, pursuant to a Securities Purchase Agreement between the Company and the stockholders of Monolith
and conditioned on Monolith achieving a product development milestone and other provisions, the Company acquired
approximately 62% of the outstanding common stock of Monolith for $15 million. The Securities Purchase Agreement
includes provisions whereby the Company will acquire the remaining outstanding stock of Monolith (“non-controlling
interest”) at a time or times based on Monolith meeting certain technical and sales targets. Consideration for the additional
investment(s) will range from $1.0 million to $10 million and will be paid no later than June 30, 2019.
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The additional investment resulted in the Company gaining control of Monolith and was accounted for as a step-acquisition
with the fair value of the original investment immediately before the acquisition estimated to be approximately $3.5 million.
As the fair value of the investment immediately prior to the transaction equaled the carrying value, there was no impact on
the Company’s Consolidated Statements of Net Income. As the Securities Purchase Agreement includes an obligation of the
Company to mandatorily redeem the non-controlling interest for cash, the fair value of the non-controlling interest was
recognized as a liability on the Company’s Consolidated Balance Sheets. Changes in the fair value of the non-controlling
interest are recognized in the Company’s Consolidated Statements of Net Income.
Commencing March 1, 2017, Monolith was reflected as a consolidated subsidiary within the Company’s Consolidated
Financial Statements. Had the acquisition occurred as of January 1, 2017, the impact on the Company’s consolidated results
of operations would not have been material.
The following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in
the Monolith acquisition:
(in thousands)
Total purchase consideration:
Purchase Price
Allocation
Original investment ................................................................................................................................ $
Cash, net of cash acquired ......................................................................................................................
Fair value of commitment to purchase non-controlling interest .............................................................
Total purchase consideration .................................................................................................................. $
Allocation of consideration to assets acquired and liabilities assumed:
Current assets, net .................................................................................................................................. $
Property, plant, and equipment ..............................................................................................................
Patented and unpatented technologies ....................................................................................................
Non-compete agreement ........................................................................................................................
Goodwill.................................................................................................................................................
Current liabilities ....................................................................................................................................
Other non-current liabilities ...................................................................................................................
$
3,500
14,172
9,000
26,672
891
789
6,720
140
20,641
(639)
(1,870)
26,672
Included in Monolith’s current assets, net was approximately $0.7 million of receivables. All Monolith goodwill, other assets
and liabilities were recorded in the Electronics segment and reflected in the United States geographic area. The goodwill
resulting from this acquisition consists largely of the Company’s expected future product sales and synergies from combining
Monolith’s products and technology with the Company’s existing electronics product portfolio. Goodwill for the above
acquisition is not expected to be deductible for tax purposes.
2016 Acquisitions
ON Portfolio
On August 29, 2016, the Company acquired certain assets of select businesses (the “ON Portfolio”) of ON Semiconductor
Corporation for $104.0 million. The Company funded the acquisition with available cash and proceeds from its credit facility.
The acquired business, which is included in the Electronics segment, consists of a product portfolio that includes transient
voltage suppression (“TVS”) diodes, switching thyristors and insulated gate bipolar transistors (“IGBTs”) for automotive
ignition applications. The acquisition expands the Company’s offerings in power semiconductor applications as well as
increases its presence in the automotive electronics market. The ON Portfolio products have strong synergies with the
Company’s existing circuit protection business and will strengthen its channel partnerships and customer engagement.
50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in
the ON Portfolio acquisition:
(in thousands)
Total purchase consideration:
Purchase Price
Allocation
Cash ........................................................................................................................................................ $
104,000
Allocation of consideration to assets acquired and liabilities assumed:
Current assets, net .................................................................................................................................. $
Customer relationships ...........................................................................................................................
Patented and unpatented technologies ....................................................................................................
Non-compete agreement ........................................................................................................................
Goodwill.................................................................................................................................................
$
4,816
31,800
8,800
2,500
56,084
104,000
All the ON Portfolio business goodwill and other assets were recorded in the Electronics segment and are reflected in the
Americas and Europe geographic areas. The customer relationships are being amortized over 13.5 years. The patented and
unpatented technologies are being amortized over 6-8.5 years. The non-compete agreement is being amortized over 4 years.
The goodwill resulting from this acquisition consists largely of the Company’s expected future product sales and synergies
from combining the ON Portfolio products with the Company’s existing power semiconductor product portfolio. $7.3 million
of goodwill for the above acquisition is expected to be deductible for tax purposes.
As required by purchase accounting rules, the Company recorded a $0.7 million step-up of inventory to its fair value as of
the acquisition date based on the preliminary valuation. All of the step-up was amortized as a non-cash charge to cost of
goods sold during 2016, as the acquired inventory was sold, and reflected as other non-segment costs.
Included in the Company’s Consolidated Statements of Net Income for the year ended December 31, 2016 are net sales of
approximately $21.8 million since the August 29, 2016 acquisition of the ON Portfolio business.
Menber’s
On April 4, 2016, the Company completed the acquisition of Menber’s S.p.A. (“Menber’s”) headquartered in Legnago, Italy
for $19.2 million, net of acquired cash and after settlement of a working capital adjustment. The Company funded the
acquisition with cash on hand and borrowings under the Company’s revolving credit facility. The acquired business is part
of the Company's commercial vehicle product business within the Automotive segment and specializes in the design,
manufacturing, and selling of manual and electrical high current switches and trailer connectors for commercial vehicles. The
acquisition expands the Company’s commercial vehicle products business globally.
The following table summarizes the preliminary purchase price allocation of the fair value of assets acquired and liabilities
assumed in the Menber’s acquisition:
(in thousands)
Total purchase consideration:
Purchase Price
Allocation
Cash, net of acquired cash ...................................................................................................................... $
19,162
Preliminary allocation of consideration to assets acquired and liabilities assumed:
Current assets, net .................................................................................................................................. $
Property, plant, and equipment ..............................................................................................................
Customer relationships ...........................................................................................................................
Patented and unpatented technologies ....................................................................................................
Trademarks and tradenames ...................................................................................................................
Goodwill.................................................................................................................................................
Current liabilities ....................................................................................................................................
Other non-current liabilities ...................................................................................................................
$
12,919
1,693
3,050
224
1,849
8,091
(7,220)
(1,444)
19,162
51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
All Menber’s goodwill and other assets and liabilities were recorded in the Automotive segment and reflected in the Europe
geographic area. The customer relationships are being amortized over 10 years. The patented and unpatented technologies
are being amortized over 5 years. The trademarks and tradenames are being amortized over 10 years. The goodwill resulting
from this acquisition consists largely of the Company’s expected future product sales and synergies from combining Menber’s
products with the Company’s existing automotive product portfolio. Goodwill for the above acquisition is not expected to be
deductible for tax purposes.
As required by purchase accounting rules, the Company recorded a $0.2 million step-up of inventory to its fair value as of
the acquisition date based on the preliminary valuation. The step-up was amortized as a non-cash charge to cost of goods sold
during 2016, as the acquired inventory was sold, with the charge reflected as other non-segment costs.
Included in the Company’s Consolidated Statements of Net Income for the year ended December 31, 2016 are net sales of
approximately $17.3 million since the April 4, 2016 acquisition of Menber’s.
PolySwitch
On March 25, 2016, the Company acquired 100% of the circuit protection business (“PolySwitch”) of TE Connectivity Ltd.
for $348.3 million, net of acquired cash and after settlement of certain post-closing adjustments. The Company funded the
acquisition with available cash on hand and borrowings under the Company’s revolving credit facility. The PolySwitch
business, which is split between the Automotive and Electronics segments, has a leading position in polymer based resettable
circuit protection devices, with a strong global presence in the automotive, battery, industrial, communications and mobile
computing markets. PolySwitch has manufacturing facilities in Shanghai and Kunshan, China and Tsukuba, Japan. The
acquisition allows the Company to strengthen its global circuit protection product portfolio, as well as strengthen its presence
in the automotive electronics and battery end markets. The acquisition also significantly increases the Company’s presence
in Japan.
The following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in
the PolySwitch acquisition:
(in thousands)
Total purchase consideration:
Purchase Price
Allocation
Original consideration ............................................................................................................................ $
Post closing consideration adjustment received .....................................................................................
Acquired cash .........................................................................................................................................
Acquired cash to be returned to seller ....................................................................................................
Total purchase consideration .................................................................................................................. $
Allocation of consideration to assets acquired and liabilities assumed:
Current assets, net .................................................................................................................................. $
Property, plant, and equipment ..............................................................................................................
Land lease ..............................................................................................................................................
Patented and unpatented technologies ....................................................................................................
Customer relationships ...........................................................................................................................
Goodwill.................................................................................................................................................
Other long-term assets ............................................................................................................................
Current liabilities ....................................................................................................................................
Other non-current liabilities ...................................................................................................................
$
350,000
(1,708 )
(3,810 )
3,810
348,292
60,228
51,613
4,290
56,425
39,720
165,088
11,228
(35,280 )
(5,020 )
348,292
All PolySwitch goodwill and other assets and liabilities were recorded in the Electronics and Automotive segments and
reflected in all geographic areas. The customer relationships are being amortized over 15 years. The patented and unpatented
technologies are being amortized over 10 years. The goodwill resulting from this acquisition consists largely of the
Company’s expected future product sales and synergies from combining PolySwitch products with the Company’s existing
automotive and electronics product portfolio. $103.8 million and $61.3 million of the goodwill for the above acquisition has
been assigned to the Electronics and Automotive segments, respectively, with $64.9 million expected to be deductible for tax
purposes.
52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As required by purchase accounting rules, the Company recorded a $6.9 million step-up of inventory to its fair value as of
the acquisition date based on the preliminary valuation. The step-up was amortized as a non-cash charge to cost of goods sold
during the second quarter of 2016, as the acquired inventory was sold, and reflected as other non-segment costs.
Included in the Company’s Consolidated Statements of Net Income for the year ended December 31, 2016 are net sales of
approximately $126.5 million since the March 25, 2016 acquisition of PolySwitch.
2016 Dispositions
During the first quarter of 2016, the Company sold its tangible and intangible assets relating to a marine product line that it
acquired as part of its acquisition of Selco A/S in 2011. In connection with this sale, the Company recorded a loss on sale of
the product line of $1.4 million reflected within selling, general, and administrative expenses for the year ended December
31, 2016. This loss was recognized as an “other” charge for segment reporting purposes.
2015 Acquisitions
Sigmar S.r.l
On October 1, 2015, the Company acquired 100% of Sigmar S.r.l. (“Sigmar”). The total purchase price for Sigmar was $6.5
million, net of cash acquired and including estimated additional net payments of up to $0.9 million, a portion of which is
subject to the achievement of certain milestones.
Located in Ozegna, Italy, Sigmar is a leading global manufacturer of water-in-fuel sensors and also manufactures selective
catalytic reduction (“SCR”) quality sensors and diesel fuel heaters for automotive and commercial vehicle applications. The
acquisition further expanded the Company’s automotive sensor product line offerings within its Automotive segment. The
Company funded the acquisition with available cash.
The following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in
the Sigmar acquisition:
(in thousands)
Total purchase consideration:
Purchase Price
Allocation
Cash, net of acquired cash ...................................................................................................................... $
Estimated additional consideration payable ...........................................................................................
Total purchase consideration .................................................................................................................. $
Allocation of consideration to assets acquired and liabilities assumed:
Current assets, net .................................................................................................................................. $
Property, plant, and equipment ..............................................................................................................
Goodwill.................................................................................................................................................
Patents ....................................................................................................................................................
Current liabilities ....................................................................................................................................
Other non-current liabilities ...................................................................................................................
$
5,558
901
6,459
2,519
1,097
4,084
2,845
(1,518)
(2,568)
6,459
All Sigmar goodwill and other assets and liabilities were recorded in the Automotive segment and reflected in the Europe
geographic area. The patents are being amortized over 10 years. The goodwill resulting from this acquisition consists largely
of the Company’s expected future product sales and synergies from combining Sigmar’s products with the Company’s
existing automotive product offerings. Goodwill for the above acquisition is not expected to be deductible for tax purposes.
Pro Forma Results
The following table summarizes, on a pro forma basis, the combined results of operations of the Company and the acquired
PolySwitch and the ON Portfolio businesses as though the acquisitions had occurred as of December 28, 2014. The Company
has not included pro forma results of operations for Menber’s or Sigmar as these results were not material to the Company.
53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The pro forma amounts presented are not necessarily indicative of either the actual consolidated results had the PolySwitch
or ON Portfolio acquisitions occurred as of December 28, 2014 or of future consolidated operating results.
(in thousands, except per share amounts)
Net sales .......................................................................................................................... $
Income before income taxes ............................................................................................
Net income ......................................................................................................................
Net income per share — basic .........................................................................................
Net income per share — diluted ......................................................................................
For the Year Ended
2015
2016
1,104,838
1,130,645 $
120,370
143,110
92,983
124,388
4.12
5.51
4.09
5.47
Pro forma results presented above primarily reflect: (i) incremental depreciation relating to fair value adjustments to property,
plant, and equipment; (ii) amortization adjustments relating to fair value estimates of intangible assets; (iii) incremental
interest expense on assumed indebtedness; and (iv) additional cost of goods sold relating to the capitalization of gross profit
as part of purchase accounting recognized for purposes of the pro forma as if it was recognized during the Company’s first
quarter of 2015. Pro forma adjustments described above have been tax affected using the Company's effective rate during the
respective periods.
The historical PolySwitch and ON Portfolio business results for the years ended December 31, 2016 and January 2, 2016 do
not include a provision for income taxes. Income tax expense for the historical PolySwitch business was only provided at the
end of the business’s fiscal year ended September 25, 2015. Income tax expense for the historical ON Portfolio business was
not provided on a standalone basis.
3. Inventories
The components of inventories at December 30, 2017 and December 31, 2016 are as follows:
(in thousands)
Raw materials .................................................................................................................. $
Work in process ...............................................................................................................
Finished goods.................................................................................................................
Total ......................................................................................................................... $
2017
2016
39,030 $
27,454
74,305
140,789 $
32,231
23,354
58,478
114,063
4. Goodwill and Other Intangible Assets
The amounts for goodwill and changes in the carrying value by segment are as follows:
(in thousands)
As of January 2, 2016 ................................................................... $
Additions(a) ...............................................................................
Impairments(b) ...........................................................................
Adjustments(c) ...........................................................................
58,246 $
162,172
—
(4,653)
As of December 31, 2016 ............................................................. $ 215,765 $
36,716
26,478
As of December 30, 2017 ............................................................. $ 278,959 $
Electronics Automotive Industrial
51,259 $
—
(8,794)
729
43,194 $
—
(4,568)
38,626 $
Additions(d) ...............................................................................
Adjustments(e) ...........................................................................
80,262 $
70,762
—
(6,439)
144,585 $
—
(8,756)
135,829 $
Total
189,767
232,934
(8,794)
(10,363)
403,544
36,716
13,154
453,414
(a) The 2016 additions resulted primarily from the acquisitions of PolySwitch, ON and Menber’s.
(b) The 2016 impairments in the Industrial segment was due to the $8.8 million impairment of Custom Products reporting
unit goodwill.
(c) Adjustments in 2016 reflect the impact of changes in foreign exchange rates.
54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(d) The 2017 additions resulted from the acquisitions of U.S. Sensor and Monolith.
(e) Adjustments in 2017 reflect adjustments to reclass goodwill by segment as well as the impact of changes in foreign
exchange rates. The impact of the reclassification was an increase in goodwill to the Electronics segment of $21.6
million and a decrease of goodwill of $16.8 million and $4.8 million to the Automotive segment and the Industrial
segment, respectively.
Due to negative events in the potash market in 2016, management revisited its long-term projections and conducted a step
one goodwill impairment analysis for its Custom Products reporting unit in the third quarter of 2016. The reporting unit failed
the step one test and management conducted a step two analysis. The fair value of the unit was estimated using the expected
present value of future cash flows over a seven-year forecast period and appraisal of certain assets. As a result, the Company
recognized a charge for goodwill impairment of $8.8 million as it wrote off the entire goodwill balance.
The components of other intangible assets at December 30, 2017 and December 31, 2016 are as follows:
As of December 30, 2017
(in thousands)
Patents, licenses and software ......................................................
Distribution network ....................................................................
Customer relationships, trademarks and tradenames ....................
Total ......................................................................................
(in thousands)
Patents, licenses and software ......................................................
Distribution network ....................................................................
Customer relationships, trademarks and tradenames ....................
Total ......................................................................................
Weighted
Average
Useful Life
11.4
12.1
15.6
Gross
Carrying
Value
$ 141,520 $
46,233
162,679
$ 350,432 $
Accumulated
Amortization
59,609 $
33,361
53,612
146,582 $
Net Book
Value
81,911
12,872
109,067
203,850
As of December 31, 2016
Weighted
Average
Useful Life
11.4
12.1
14.4
Gross
Carrying
Value
$ 131,611 $
49,150
150,887
$ 331,648 $
Accumulated
Amortization
48,004 $
30,155
40,463
118,622 $
Net Book
Value
83,607
18,995
110,424
213,026
During the year ended December 31, 2016, the Company recognized non-cash impairment charges totaling $6.0 million, of
which $2.2 million related to the impairment of certain customer relationship intangible assets in the Custom Products
reporting unit within the Industrial segment and $3.8 million related to the impairment of the Custom Products tradename.
The impairment of the customer relationship intangible assets resulted from lower expectations of future revenue to be derived
from those relationships while the tradename impairment resulted from lower expectations of future cash flows of the Custom
Products reporting unit.
During the years ended December 30, 2017 and December 31, 2016, the Company recorded additions to other intangible
assets of $11.0 million and $144.4 million, respectively, for acquisitions during those years, the components of which were
as follows:
2017
2016
(in thousands)
Patents, licenses and software ......................................................
Customer relationships, trademarks and tradenames ....................
Total ......................................................................................
Weighted
Average
Useful Life
9.6
9.0
$
$
Weighted
Average
Useful Life
9.6
13.5
$
$
Amount
65,449
78,919
144,368
Amount
7,810
3,220
11,030
For intangible assets with definite lives, the Company recorded amortization expense of $24.7 million, $19.3 million, and
$11.9 million in 2017, 2016, and 2015, respectively.
55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Estimated amortization expense related to intangible assets with definite lives at December 30, 2017 is as follows:
(in thousands)
2018 ............................................................................................................................................................... $
2019 ...............................................................................................................................................................
2020 ...............................................................................................................................................................
2021 ...............................................................................................................................................................
2022 ...............................................................................................................................................................
2023 and thereafter ........................................................................................................................................
$
Amount
25,689
25,528
24,879
23,093
22,058
82,603
203,850
5. Lease Commitments
The Company leases certain office and warehouse space as well as certain machinery and equipment under non-cancellable
operating leases. Rent expense under these leases was $11.6 million, $12.6 million, and $11.1 million in 2017, 2016, and
2015, respectively.
Rent expense is recognized on a straight-line basis over the term of the leases. The difference between straight-line basis rent
and the amount paid has been recorded as accrued lease obligations. The Company also has leases that have lease renewal
provisions. As of December 30, 2017, all operating leases outstanding were with third parties. The Company did not have
any capital leases as of December 30, 2017.
Future minimum payments for all non-cancellable operating leases with initial terms of one year or more at December 30,
2017 are as follows:
(in thousands)
2018 ............................................................................................................................................................... $
2019 ...............................................................................................................................................................
2020 ...............................................................................................................................................................
2021 ...............................................................................................................................................................
2022 ...............................................................................................................................................................
2023 and thereafter ........................................................................................................................................
$
Future
Minimum
Payments
10,842
6,194
5,425
4,632
3,464
5,021
35,578
6. Debt
The carrying amounts of debt at December 30, 2017 and December 31, 2016 are as follows:
(in thousands)
Revolving Credit Facility ................................................................................................ $
Term Loan .......................................................................................................................
Entrusted loan ..................................................................................................................
Euro Senior Notes, Series A due 2023 ............................................................................
Euro Senior Notes, Series B due 2028 ............................................................................
U.S. Senior Notes, Series A due 2022 .............................................................................
U.S. Senior Notes, Series B due 2027 .............................................................................
Unamortized debt issuance costs .....................................................................................
Total debt .....................................................................................................................
Less: Current maturities ..................................................................................................
Total long-term debt .................................................................................................... $
2017
2016
— $
122,500
—
139,623
113,369
25,000
100,000
(4,881 )
495,611
(6,250 )
489,361 $
112,500
120,313
3,522
122,313
99,314
—
—
(3,820)
454,142
(6,250)
447,892
56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Revolving Credit Facility / Term Loan
On March 4, 2016, the Company entered into a five-year credit agreement (“Credit Agreement”) with a group of lenders for
up to $700.0 million. The Credit Agreement consisted of an unsecured revolving credit facility (“Revolving Credit Facility”)
of $575.0 million and an unsecured term loan credit facility (“Term Loan”) of up to $125.0 million. In addition, the Company
had the ability, from time to time, to increase the size of the Revolving Credit Facility and the Term Loan by up to an
additional $150.0 million, in the aggregate, in each case in minimum increments of $25.0 million, subject to certain conditions
and the agreement of participating lenders. For the Term Loan, the Company was required to make quarterly principal
payments of $1.6 million through March 31, 2018 and $3.1 million from June 30, 2018 through December 31, 2020 with the
remaining balance due on March 4, 2021.
On October 13, 2017, the Company amended the Credit Agreement to increase the Revolving Credit Facility from $575.0
million to $700.0 million and increase the Term Loan from $125.0 million to $200.0 million and to extend the expiration date
from March 4, 2021 to October 13, 2022. The Credit Agreement also includes the option for the Company to increase the
size of the Revolving Credit Facility and the Term Loan by up to an additional $300.0 million, in the aggregate, subject to
the satisfaction of certain conditions set forth in the Credit Agreement. Term Loans may be made in up to two advances. The
first advance of $125.0 million occurred on October 13, 2017 and the second advance of $75.0 million occurred on January
16, 2018. For the Term Loan, the Company is required to make quarterly principal payments of 1.25% of the original term
loan ($1.6 million as of December 30, 2017 increasing to $2.5 million with the second advance on January 16, 2018) through
maturity, with the remaining balance due on October 13, 2022.
Outstanding borrowings under the Credit Agreement bear interest, at the Company’s option, at either LIBOR, fixed for
interest periods of one, two, three or six-month periods, plus 1.00% to 2.00%, or at the bank’s Base Rate, as defined, plus
0.00% to 1.00%, based upon the Company’s Consolidated Leverage Ratio, as defined. The Company is also required to pay
commitment fees on unused portions of the credit agreement ranging from 0.15% to 0.25%, based on the Consolidated
Leverage Ratio, as defined. The credit agreement includes representations, covenants and events of default that are customary
for financing transactions of this nature. The effective interest rate on outstanding borrowings under the credit facility was
3.07% at December 30, 2017.
As of December 30, 2017, the Company had $0.1 million outstanding in letters of credit and had available $699.9 million of
borrowing capacity under the Revolving Credit Facility. At December 30, 2017, the Company was in compliance with all
covenants under the Credit Agreement.
Senior Notes
On December 8, 2016, the Company entered into a Note Purchase Agreement, pursuant to which the Company issued and
sold €212 million aggregate principal amount of senior notes in two series. The funding date for the Euro denominated senior
notes occurred on December 8, 2016 for €117 million in aggregate amount of 1.14% Senior Notes, Series A, due December
8, 2023 (“Euro Senior Notes, Series A due 2023”), and €95 million in aggregate amount of 1.83% Senior Notes, Series B due
December 8, 2028 (“Euro Senior Notes, Series B due 2028”) (together, the “Euro Senior Notes”). Interest on the Euro Senior
Notes is payable semiannually on June 8 and December 8, commencing June 8, 2017.
On December 8, 2016, the Company entered into a Note Purchase Agreement, pursuant to which the Company issued and
sold $125 million aggregate principal amount of senior notes in two series. On February 15, 2017, $25 million in aggregate
principal amount of 3.03% Senior Notes, Series A, due February 15, 2022 (“U.S. Senior Notes, Series A due 2022”), and
$100 million in aggregate principal amount of 3.74% Senior Notes, Series B, due February 15, 2027 (“U.S. Senior Notes,
Series B due 2027”) (together, the “U.S. Senior Notes due 2022 and 2027”) were funded. Interest on the U.S. Senior Notes
due 2022 and 2027 is payable semiannually on February 15 and August 15, commencing August 15, 2017.
On November 15, 2017, the Company entered into a Note Purchase Agreement pursuant to which the Company issued and
sold $175 million in aggregate principal amount of senior notes in two series. On January 16, 2018, $50 million aggregate
principal amount of 3.48% Senior Notes, Series A, due February 15, 2025 (“U.S. Senior Notes, Series A due 2025”) and
$125 million in aggregate principal amount of 3.78% Senior Notes, Series B, due February 15, 2030 (“U.S. Senior Notes,
Series A due 2030”) (together the “U.S. Senior Notes due 2025 and 2030” and with the Euro Senior Notes and the U.S. Senior
Notes 2022 and 2027, the “Senior Notes”) were funded. Interest on the U.S. Senior Notes due 2025 and 2030 will be payable
on February 15 and August 15, commencing on August 15, 2018.
57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Senior Notes have not been registered under the Securities Act, or applicable state securities laws. The Senior Notes are
general unsecured senior obligations and rank equal in right of payment with all existing and future unsecured unsubordinated
indebtedness of the Company.
The Senior Notes are subject to certain customary covenants, including limitations on the Company’s ability, with certain
exceptions, to engage in mergers, consolidations, asset sales and transactions with affiliates, to engage in any business that
would substantially change the general business of the Company, and to incur liens. In addition, the Company is required to
satisfy certain financial covenants and tests relating to, among other matters, interest coverage and leverage. At December
30, 2017, the Company was in compliance with all covenants under the Senior Notes.
The Company may redeem the Senior Notes upon the satisfaction of certain conditions and the payment of a make-whole
amount to noteholders, and are required to offer to repurchase the Senior Notes at par following certain events, including a
change of control.
Debt Issuance Costs
The Company incurred debt issuance costs of $1.6 million in relation to the Credit Agreement which, along with the remaining
balance of debt issuance costs of the previous credit facility, are being amortized over the life of the Credit Agreement. The
Company additionally incurred aggregate debt issuance costs of $2.6 million in relation to the Senior Notes which are being
amortized over the respective lives of the Series A and B notes.
Entrusted Loan
During 2014, the Company entered into an entrusted loan arrangement (“Entrusted Loan”) of Chinese renminbi 110.0 million
(approximately U.S. $17.9 million) between two of its China legal entities, Littelfuse Semiconductor (“Wuxi”) Company (the
“lender”) and Suzhou Littelfuse OVS Ltd. (the “borrower”), utilizing Bank of America, N.A., Shanghai Branch as agent.
Direct borrowing and lending between two commonly owned commercial entities was strictly forbidden at the time under
China’s regulations requiring the use of a third-party agent to enable loans between Chinese legal entities. As a result, the
Entrusted Loan is reflected as both a long-term asset and long-term debt on the Company’s Consolidated Balance Sheets and
is reflected in the investing and financing activities in its Consolidated Statements of Cash Flows. Interest expense and interest
income will be recorded between the lender and borrower with no net impact on the Company’s Consolidated Statements of
Income since the amounts will be offsetting. The loan interest rate per annum is 5.25%. The Entrusted Loan is used to finance
the operation and working capital needs of the borrower and matures in November 2019. The balance of the Entrusted Loan
was paid off as of September 30, 2017.
Interest paid on all Company debt was approximately $13.4 million, $8.6 million, and $4.1 million in 2017, 2016, and 2015,
respectively.
Debt Maturities
Scheduled maturities of the Company’s long-term debt for each of the five years succeeding December 30, 2017 and
thereafter are summarized as follows:
(in thousands)
2018 ............................................................................................................................................................... $
2019 ...............................................................................................................................................................
2020 ...............................................................................................................................................................
2021 ...............................................................................................................................................................
2022 ...............................................................................................................................................................
2023 and thereafter ........................................................................................................................................
$
Scheduled
Maturities
6,250
6,250
6,250
6,250
122,500
352,992
500,492
58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Fair Value of Assets and Liabilities
For assets and liabilities measured at fair value on a recurring and nonrecurring basis, a three-level hierarchy of measurements
based upon observable and unobservable inputs is used to arrive at fair value. Observable inputs are developed based on
market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions about
valuation based on the best information available in the circumstances. Depending on the inputs, the Company classifies each
fair value measurement as follows:
Level 1—Valuations based on unadjusted quoted prices for identical assets or liabilities in active markets;
Level 2—Valuations based upon quoted prices for similar instruments, prices for identical or similar instruments in
markets that are not active, or model-derived valuations, all of whose significant inputs are observable, and
Level 3—Valuations based upon one or more significant unobservable inputs.
Following is a description of the valuation methodologies used for instruments measured at fair value and their classification
in the valuation hierarchy.
Investments
Investments in equity securities listed on a national market or exchange are valued at the last sales price and classified within
Level 1 of the valuation hierarchy. Such securities are further detailed in Note 1, Summary of Significant Accounting Policies
and Other Information.
Defined Benefit Plan Assets / Non-qualified Supplemental Retirement and Savings Plan Investments
See Note 8, Benefit Plans for description of valuation methodologies and investment balances for defined benefit plan assets
and investments related to the Company’s Non-Qualified Supplemental Retirement and Savings Plan.
The following table presents assets measured at fair value by classification within the fair value hierarchy as of December
30, 2017:
Fair Value Measurements Using
(in thousands)
Investment in Polytronics ............................................................. $
Level 1
Level 2
Level 3
Total
10,993 $
— $
— $
10,993
The following table presents assets measured at fair value by classification within the fair value hierarchy as of December
31, 2016:
Fair Value Measurements Using
(in thousands)
Investment in Polytronics ............................................................. $
Level 1
Level 2
Level 3
Total
10,435 $
— $
— $
10,435
There were no changes during 2017 to the Company’s valuation techniques used to measure asset and liability fair values on
a recurring basis. As of December 30, 2017 and December 31, 2016, the Company held no non-financial assets or liabilities
that are required to be measured at fair value on a recurring basis.
In addition to the methods and assumptions used for the financial instruments recorded at fair value as discussed above, the
following methods and assumptions are used to estimate the fair value of other financial instruments that are not marked to
market on a recurring basis. The Company’s other financial instruments include cash and cash equivalents, short-term
investments, accounts receivable and its long-term debt. Due to their short-term maturity, the carrying amounts of cash and
cash equivalents, short-term investments and accounts receivable approximate their fair values. The Company’s revolving
and term loan debt facilities’ fair values approximate book value at December 30, 2017 and December 31, 2016, as the rates
on these borrowings are variable in nature.
59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The carrying value and estimated fair values of the Company’s Euro Senior Notes, Series A and Series B and U.S. Senior
Notes, Series A and Series B, as of December 30, 2017 and December 31, 2016 were as follows:
2017
2016
(in thousands)
Euro Senior Notes, Series A due 2023 ................................. $
Euro Senior Notes, Series B due 2028 .................................
U.S. Senior Notes, Series A due 2022 ..................................
U.S. Senior Notes, Series B due 2027 ..................................
Carrying
Value
Estimated
Fair Value
Carrying
Value
139,623 $
113,369
25,000
100,000
138,294 $ 122,313 $
95,314
111,579
25,000
24,737
100,000
99,992
Estimated
Fair Value
122,586
99,230
24,746
98,660
The fair value as of the measurement date, net book value as of the end of the year and related impairment charge for assets
measured at fair value on a nonrecurring basis subsequent to initial recognition during the years ended December 31, 2016
were as follows:
(in thousands)
Goodwill .......................................................................................... $
Other intangible assets.....................................................................
Total ................................................................................................ $
Year Ended
December 31, 2016
Impairment
Charge
Fair Value
Measurement
(Level 3)
As of
December 31,
2016
Net
Book
Value
8,794 $
6,015
14,809 $
— $
680
680 $
—
660
660
During the year ended December 31, 2016, the goodwill related to the Custom Products reporting unit was written down to
its implied fair value of zero. In addition, the company recorded a $6.0 million impairment charge, including $3.8 million
related to the Custom Products trade name and $2.2 million for the customer relationship intangible assets. After recording
the impairment charges, there was no remaining value related to the customer relationship intangible assets while $0.7 million
remaining net book value related to the tradename.
The company’s accounting and finance management determines the valuation policies and procedures for Level 3 fair value
measurements and is responsible for the development and determination of unobservable inputs. The following table presents
the fair value, valuation techniques and related unobservable inputs for these Level 3 measurements for the year ended
December 31, 2016:
(in thousands, except rates data)
Tradename ....................................... $
Fair Value
Valuation
Technique
680 Relief from royalty
Customer relationships .................... $
—
Excess earnings
Unobservable
Inputs
Discount rate:
Royalty rate:
Discount rate:
Attrition rate:
Rates
18%
1%
18%
5%
8. Benefit Plans
The Company has Company-sponsored defined benefit pension plans covering employees in the U.K., Germany, the
Philippines, China, Japan, Mexico, Italy and France. The amount of the retirement benefits provided under the plans is based
on years of service and final average pay.
PolySwitch Acquisition
During 2016, as a result of the PolySwitch acquisition, past service liabilities were assumed by the Company in mainland
China, France, Germany, Japan, Mexico, and Taiwan (China), together with a small amount of plan assets in Taiwan (China).
60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Littelfuse Inc. Retirement Plan Termination
The company received approval from the IRS on April 14, 2015 on its Application for Determination for Terminating Plan
to terminate the U.S. defined benefit pension plan, the Littelfuse Inc. Retirement Plan, effective July 30, 2014. All plan
liabilities were settled (either via lump sum payout or purchase of a group annuity contract) in the third quarter of 2015. A
cash contribution of $9.1 million was made to the U.S. defined benefit plan’s trust in the third quarter of 2015 to fully fund
the plan on a buyout basis, and the eventual settlement of the plan’s liabilities triggered a settlement charge of $30.2 million
in the third quarter of 2015. In the fourth quarter of 2015 there was an adjustment to the price of the annuity contract which
resulted in a refund of premium to the company of $0.3 million. This refund of premium, effectively a re-measurement gain,
was recognized in the fourth quarter of 2015 as a dollar-for-dollar adjustment to the $30.2 million earnings charge recognized
in the third quarter of 2015, resulting in a final settlement loss of $29.9 million for the fiscal year ended January 2, 2016.
During 2016, there were two further adjustments to the price of the annuity contract. Their combined effect resulted in a
further refund of premium to the company of $0.3 million. This refund of premium was considered additional actual return
on the assets during 2016, followed by a negative employer contribution of that same amount in the asset reconciliation table
below.
Benefit plan related information is as follows for the years 2017 and 2016:
(in thousands)
Change in benefit obligation:
Benefit obligation at beginning of year ........................................................................... $
Service cost ..................................................................................................................
Interest cost ..................................................................................................................
Net actuarial loss (gain) ...............................................................................................
Benefits paid from the trust .........................................................................................
Benefits paid directly by the Company ........................................................................
Curtailments and settlements .......................................................................................
Acquisitions .................................................................................................................
Effect of exchange rate movements .............................................................................
Other ............................................................................................................................
Benefit obligation at end of year ..................................................................................... $
Change in plan assets at fair value:
Fair value of plan assets at beginning of year ................................................................. $
Actual return on plan assets .........................................................................................
Employer contributions ...............................................................................................
Benefits paid ................................................................................................................
Acquisitions .................................................................................................................
Effect of exchange rate movements .............................................................................
Fair value of plan assets at end of year ............................................................................
Net amount recognized/(unfunded status) ...................................................................... $
2017
2016
55,606 $
2,037
1,887
(433 )
(1,405 )
(1,098 )
(31 )
—
5,477
5,228
67,268 $
42,208 $
2,962
264
(1,405 )
—
4,094
48,123
(19,145 ) $
50,282
1,509
1,662
10,190
(2,329)
250
(427)
2,023
(7,554)
—
55,606
44,629
6,929
(126)
(2,329)
24
(6,919)
42,208
(13,398)
Amounts recognized in the Consolidated Balance Sheets as of December 30, 2017 and December 31, 2016 consist of the
following:
(in thousands)
Amounts recognized in the Consolidated Balance Sheets consist of:
Noncurrent assets ............................................................................................................ $
Current benefit liability ...................................................................................................
Noncurrent benefit liability .............................................................................................
Net liability recognized ................................................................................................... $
2017
2016
78 $
(481 )
(18,742 )
(19,145 ) $
—
—
(13,398)
(13,398)
61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Amounts recognized in accumulated other comprehensive income (loss), pre-tax as of December 30, 2017 and December 31,
2016 consist of:
(in thousands)
Net actuarial loss ............................................................................................................ $
Prior service (cost) .........................................................................................................
Net amount recognized, pre-tax ...................................................................................... $
2017
2016
12,261 $
—
12,261 $
13,107
—
13,107
The estimated net actuarial loss (gain) which will be amortized from accumulated other comprehensive income (loss) into
benefit cost in 2018 is approximately $0.3 million.
The components of pension expense for the years 2017, 2016, and 2015 are as follows:
(in thousands)
Components of net periodic benefit cost:
2017
2016
U.S.
Foreign
Total
2015
Service cost ....................................................... $
Interest cost .......................................................
Expected return on plan assets ..........................
Amortization of losses ......................................
Net periodic benefit cost ...................................
Curtailment/Settlement loss (gain) ..................
Total expense (income) for the year ................. $
2,037 $
1,887
(1,990)
337
2,271
(25)
2,246 $
1,509 $
1,662
(1,935)
306
1,542
(36)
1,506 $
750 $
3,093
(2,749)
870
1,964
29,928
31,892 $
824 $
1,735
(2,346)
221
434
—
434 $
1,574
4,828
(5,095)
1,091
2,398
29,928
32,326
Weighted average assumptions used to determine net periodic benefit cost for the years 2017, 2016, and 2015 are as follows:
Discount rate ...............................................................................
Expected return on plan assets ....................................................
Compensation increase rate .........................................................
Measurement dates ...................................................................... 12/31/16 1/2/16
3.0%
4.5%
4.5%
2017
2016
U.S.
2015
Foreign
3.9%
3.7%
6.8%
5.1%
5.3%
—
12/27/14 12/27/14
3.7 %
4.9 %
5.3 %
The accumulated benefit obligation for the foreign plans was $60.5 million and $51.3 million at December 30, 2017 and
December 31, 2016, respectively.
The following table provides a summary of under-funded or unfunded pension benefit plans with projected benefit obligations
in excess of plan assets as of December 30, 2017 and December 31, 2016:
(in thousands)
Projected benefit obligation ............................................................................................ $
Fair value of plan assets ..................................................................................................
2017
2016
28,515 $
9,292
48,985
42,179
The following table provides a summary of under-funded or unfunded pension benefit plans with accumulated benefit
obligations in excess of plan assets as of December 30, 2017 and December 31, 2016:
(in thousands)
Accumulated benefit obligation ..................................................................................... $
Fair value of plan assets ..................................................................................................
2017
2016
18,990 $
6,003
51,306
38,912
62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Weighted average assumptions used to determine benefit obligations as of December 30, 2017, December 31, 2016 and
January 2, 2016 are as follows:
Discount rate .....................................................................................
Compensation increase rate ...............................................................
Measurement dates ............................................................................
2017
2016
2015
3.1%
5.0%
2.6 %
4.5 %
3.8 %
6.2 %
12/30/17
12/31/16
1/2/16
Expected benefit payments to be paid to participants for the fiscal year ending are as follows:
(in thousands)
Expected Benefit
Payments
2018 ..................................................................................................................................................... $
2019 .....................................................................................................................................................
2020 .....................................................................................................................................................
2021 .....................................................................................................................................................
2022 .....................................................................................................................................................
2023-2027 ...............................................................................................................................................
2,467
2,474
2,473
2,802
2,776
16,777
The Company expects to make approximately $1.4 million of contributions to the plans in 2018.
Defined Benefit Plan Assets
Based upon analysis of the target asset allocation and historical returns by type of investment, the Company has assumed that
the expected long-term rate of return will be 4.5% on plan assets. Assets are invested to maximize long-term return taking
into consideration timing of settlement of the retirement liabilities and liquidity needs for benefits payments. Pension plan
assets were invested as follows, and were not materially different from the target asset allocation:
Equity securities ..............................................................................................................
Debt securities .................................................................................................................
Cash and equivalents .......................................................................................................
Asset Allocation
2017
2016
35 %
64 %
1 %
100 %
32 %
65 %
3 %
100 %
The Company segregated its plan assets by the following major categories and level for determining their fair value as of
December 30, 2017 and December 31, 2016. All plan assets that are valued using the net asset value per share (“NAV”)
practical expedient have not been included within the fair value hierarchy but are separately disclosed.
Cash and cash equivalents – Carrying value approximates fair value. As such these assets were classified as Level 1. The
Company also invests in certain short-term investments which are valued using the amortized cost method and at NAV.
Equity – The values of individual equity securities were based on quoted prices in active markets. As such, these assets are
classified as Level 1. Additionally, the Company invests in certain equity funds that are valued at calculated NAV.
Fixed income – Fixed income securities are typically priced based on a last trade basis and are exchange-traded. Accordingly,
the Company classified fixed income securities as Level 1. The Company also invests in certain fixed income funds which
are valued at NAV.
For any Level 2 plan assets, management reviews significant investments on a periodic basis including investigation of
unusual fluctuations in price or returns and obtaining an understanding of the pricing methodology to assess the reliability of
third-party pricing estimates.
The valuation methodologies described above may generate a fair value calculation that may not be indicative of net realizable
value or future fair values. While the Company believes the valuation methodologies used are appropriate, the use of different
methodologies or assumptions in calculating fair value could result in different amounts. The Company invests in various
63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
assets in which valuation is determined by NAV. The Company believes that the NAV is representative of fair value at the
reporting date, as there are no significant restrictions on redemption of these investments or other reasons to indicate that the
investment would be redeemed at an amount different than the NAV.
The following table presents the Company’s pension plan assets measured at fair value by classification within the fair value
hierarchy as of December 30, 2017:
(in thousands)
Equities:
Fair Value Measurements Using
Level 2
Level 1
Level 3
NAV
Total
Global Equity 50:50 Index Fund ...................... $
Global Equity 50:50 GBP Hedged Fund...........
Philippine Stock ................................................
Fixed income:
Investment Grade Corporate Bond Funds ........
Over 15y Gilts Index Fund ..............................
Active Corp Bond – Over 10 Yr Fund ..............
Over 5y Index-Linked Gilts Fund .....................
Philippine Long Government Securities ...........
Philippine Long Corporate Bonds ....................
Cash and equivalents ............................................
Total pension plan assets ...................................... $
— $
—
1,031
6,003
—
—
—
1,362
723
173
9,292 $
— $
—
—
—
—
—
—
—
—
—
— $
— $
—
—
—
—
—
—
—
—
—
— $
7,898 $
8,134
—
—
3,684
6,835
12,049
—
—
231
38,831 $
7,898
8,134
1,031
6,003
3,684
6,835
12,049
1,362
723
404
48,123
The following table presents the Company’s pension plan assets measured at fair value by classification within the fair value
hierarchy as of December 31, 2016:
(in thousands)
Equities:
Fair Value Measurements Using
Level 2
Level 1
Level 3
NAV
Total
Global Equity 50:50 Index Fund ...................... $
Global Equity 50:50 GBP Hedged Fund...........
Philippine Stock ................................................
Fixed income:
Investment Grade Corporate Bond Funds ........
Over 15y Gilts Index Fund ..............................
Active Corp Bond – Over 10 Yr Fund ..............
Over 5y Index-Linked Gilts Fund .....................
Philippine Long Government Securities ...........
Philippine Long Corporate Bonds ....................
Cash and equivalents ............................................
Total pension plan assets ...................................... $
— $
—
906
5,372
—
—
—
1,133
751
476
8,638 $
— $
—
—
—
—
—
—
—
—
—
— $
— $
—
—
—
—
—
—
—
—
—
— $
6,321 $
6,406
—
—
3,265
5,902
10,724
—
—
952
33,570 $
6,321
6,406
906
5,372
3,265
5,902
10,724
1,133
751
1,428
42,208
Defined Contribution Plan
The Company also maintains a 401(k) savings plan covering substantially all U.S. employees. The Company matches 100%
of the employee’s annual contributions for the first 4% of the employee’s eligible compensation. The Company may provide
an additional discretionary match to participants and made discretionary matches of 2% of the employee’s eligible
compensation for each of the years ended December 30, 2017, December 31, 2016 and January 2, 2016. Employees are
immediately vested in their contributions plus actual earnings thereon, as well as the Company contributions. Company
matching contributions amounted to $3.5 million, $3.2 million, and $2.8 million in 2017, 2016, and 2015, respectively.
Non-qualified Supplemental Retirement and Savings Plan
The Company has a non-qualified Supplemental Retirement and Savings Plan which provides additional retirement benefits
for certain management employees and named executive officers by allowing participants to defer a portion of their annual
compensation. The Company maintains accounts for participants through which participants make investment elections. The
64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
investments are subject to the claims of the Company’s creditors and the Company is responsible for the payment of all
benefits under the plan from its general assets. As of December 30, 2017, there was $8.0 million of marketable securities
related to the plan included in Other assets and $8.0 million of accrued compensation included in Other long-term liabilities.
The marketable securities are classified as Level 1 under the fair value hierarchy as they are maintained in mutual funds with
readily determinable fair value. The Company made matching contributions to the plan of $0.3 million in 2017.
9. Shareholders’ Equity
Equity Plans: The Company has equity-based compensation plans authorizing the granting of stock options, restricted shares,
restricted share units, performance shares and other stock rights to employees and directors. As of December 30, 2017, there
were 1.3 million shares available for issuance of future awards under the Company’s equity-based compensation plans.
Stock options vest over a three, four or five-year period and are exercisable over either a seven or ten-year period commencing
from the date of the grant. Restricted shares and share units granted by the Company generally vest over three to four years.
The following table provides a reconciliation of outstanding stock options for the fiscal year ended December 30, 2017.
Shares
Under
Option
Weighted
Average
Price
Weighted
Average
Remaining
Contract
Life
(Years)
Aggregate
Intrinsic
Value
(000’s)
Outstanding December 31, 2016 ..................................................
Granted .....................................................................................
Exercised ..................................................................................
Forfeited ....................................................................................
Outstanding December 30, 2017 ..................................................
Exercisable December 30, 2017 ...................................................
356,184 $
76,082
(27,965)
—
404,301
203,745
98.65
154.15
84.93
NA
110.04
92.36
4.5 $
3.6
35,488
21,486
The following table provides a reconciliation of non-vested restricted share and share unit awards for the fiscal year ended
December 30, 2017.
Nonvested December 31, 2016........................................................................................
Granted ........................................................................................................................
Vested ..........................................................................................................................
Forfeited .......................................................................................................................
Nonvested December 30, 2017........................................................................................
Weighted
Average
Grant-Date
Fair Value
106.92
151.91
102.49
111.56
130.40
Shares
207,330 $
95,621
(95,520 )
(7,738 )
199,693
The total intrinsic value of options exercised during 2017, 2016, and 2015 was $2.2 million, $13.3 million, and $5.0 million,
respectively. The total fair value of shares vested was $15.0 million, $10.7 million, and $8.1 million for 2017, 2016, and
2015, respectively. The total amount of share-based liabilities paid was $0.9 million, $0.6 million and $0.4 million for 2017,
2016, and 2015, respectively.
The Company recognizes compensation cost of all share-based awards as an expense on a straight-line basis over the vesting
period of the awards. At December 30, 2017, the unrecognized compensation cost for options, restricted shares and
performance shares was $15.9 million before tax, and will be recognized over a weighted-average period of 1.9 years.
Compensation cost included as a component of selling, general, and administrative expense for all equity compensation plans
discussed above was $17.3 million, $12.8 million, and $10.7 million for 2017, 2016, and 2015, respectively. The total income
tax benefit recognized in the Consolidated Statements of Net Income was $6.0 million, $4.4 million and $3.7 million for
2017, 2016, and 2015, respectively.
65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company uses the Black-Scholes option valuation model to determine the fair value of awards granted. The weighted
average fair value of and related assumptions for options granted are as follows:
Weighted average fair value of options granted ................................
Assumptions:
Risk-free interest rate ..................................................................
Expected dividend yield ..............................................................
Expected stock price volatility ....................................................
Expected life of options (years) ..................................................
2017
$30.77
1.79%
0.86%
23.0%
4.4
2016
$26.06
1.37%
0.97%
26.0%
4.6
2015
$21.99
1.25%
1.04%
28.0%
4.6
Expected volatilities are based on the historical volatility of the Company’s stock price. The expected life of options is based
on historical data for options granted by the Company. The risk-free rates are based on yields available at the time of grant
on U.S. Treasury bonds with maturities consistent with the expected life assumption.
Accumulated Other Comprehensive Income (Loss) (“AOCI”): The following table sets forth the changes in the components
of AOCI by component for fiscal years 2017, 2016, and 2015:
(in thousands)
Balance at December 27, 2014 ............................................... $
2015 activity .......................................................................
Balance at January 2, 2016 .....................................................
2016 activity .......................................................................
Balance at December 31, 2016 ...............................................
2017 activity .......................................................................
Balance at December 30, 2017 ............................................... $
(29,615) $
20,893
(8,722)
(3,261)
(11,983)
1,147
(10,836) $
10,791 $
793
11,584
(815)
10,769
(974)
9,795 $
Pension and
postretirement
liability and
reclassification
adjustments (a)
Gain (Loss)
on
investments
Foreign
currency
translation
adjustments
Accumulated
other
comprehensive
income (loss)
(21,126)
(24,545)
(45,671)
(28,908)
(74,579)
10,911
(63,668)
(2,302 ) $
(46,231 )
(48,533 )
(24,832 )
(73,365 )
10,738
(62,627 ) $
(a) Net of tax of $1.4 million, $1.1 million, and $0.7 million at December 30, 2017; December 31, 2016; and January 2, 2016,
respectively.
Preferred Stock: The Board of Directors may authorize the issuance of preferred stock from time to time in one or more series
with such designations, preferences, qualifications, limitations, restrictions, and optional or other special rights as the Board
may fix by resolution.
The Company’s Board of Directors authorized the repurchase of up to 1,000,000 shares of the Company’s common stock
under a program for the period May 1, 2017 to April 30, 2018. The Company did not repurchase any shares of its common
stock during fiscal 2017 under the stock repurchase program.
10. Income Taxes
On December 22, 2017, the U.S. enacted legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act").
Among other things, the Tax Act reduces the U.S. corporate federal income tax rate from 35% to 21%, adds base broadening
provisions which limit deductions and address excessive international tax planning, imposes a one-time tax (the “Toll
Charge”) on accumulated earnings of certain non-U.S. subsidiaries and enables repatriation of earnings of non-U.S.
subsidiaries free of U.S. federal income tax. Other than the Toll Charge (which is applicable to the Company for 2017), the
provisions will generally be applicable to the Company in 2018 and beyond.
In accordance with the guidance provided in SEC Staff Accounting Bulletin (“SAB”) No. 118, in the fourth quarter of 2017
the Company recorded a charge of $47 million as a provisional reasonable estimate of the impact of the Tax Act, including
$49 million for the Toll Charge net of $2 million for other net tax benefits. The Company is continuing to analyze the Tax
Act and plans to finalize the estimate within the measurement period outlined in SAB No. 118. The final charge may differ
66
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
from the provisional reasonable estimate if provisions of the Tax Act, and their interaction with other provisions of the U.S.
Internal Revenue Code, are interpreted differently than interpretations made by the Company in determining the estimate,
whether through issuance of administrative guidance, or through further review of the Tax Act by the Company and its
advisors. Aside from these interpretation issues, the final charge may differ from the provisional reasonable estimate due to
refinements of accumulated non-U.S. earnings and tax pool data.
One of the base broadening provisions of the Tax Act is commonly referred to as the “GILTI” provisions. In accordance with
guidance issued by the FASB staff, the Company has not adopted an accounting policy for GILTI. Thus, the U.S. balance
sheet tax accounts, notably deferred taxes, were computed without consideration of the possible future impact of the GILTI
provisions. The Company intends to adopt an accounting policy for GILTI within the measurement period outlined in SAB
118.
Domestic and foreign income (loss) before income taxes is as follows:
(in thousands)
Domestic ............................................................................................ $
Foreign ...............................................................................................
Income before income taxes ............................................................... $
2017
2016
2015
(20,496) $
224,533
204,037 $
(9,563) $
132,837
123,274 $
1,313
105,635
106,948
Federal, state and foreign income tax expense (benefit) consists of the following:
(in thousands)
Current:
2017
2016
2015
Federal ............................................................................................ $
State ................................................................................................
Foreign ............................................................................................
Subtotal ..............................................................................................
Deferred:
Federal and State .............................................................................
Foreign ............................................................................................
Subtotal ..............................................................................................
Provision for income taxes ................................................................. $
34,060 $
450
32,945
67,455
16,562
501
17,063
84,518 $
(3,992) $
(648)
28,695
24,055
(1,594)
(3,675)
(5,269)
18,786 $
(6,686 )
2,078
19,211
14,603
11,330
149
11,479
26,082
The current federal and state income tax expense for 2017 includes the preliminary estimate of $49 million for the Toll Charge
as discussed above, partially offset by $13 million of foreign tax credits. The Company will elect to pay the 2017 current
federal income tax over the eight-year period prescribed by the Tax Act. The long-term portion of the 2017 current federal
income tax (approximately $32 million) is recorded in the Other long-term liabilities on the Consolidated Balance Sheets as
of December 30, 2017.
The current federal tax benefit for 2016 includes an estimated $3 million benefit as a result of the carry-back of the 2016 U.S.
federal net operating loss to the 2014 tax year.
The current federal tax benefit for 2015 includes an $11.7 million benefit reclassified from accumulated other comprehensive
income as a result of the company’s termination of the U.S. defined benefit pension plan as described in Note 8, Benefit
Plans.
67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation between income taxes computed on income before income taxes at the federal statutory rate and the provision
for income taxes is provided below:
(in thousands)
Tax expense at statutory rate of 35% ................................................. $
Provisional amount of the Toll charge ............................................
Provisional Tax Act impact other than the Toll charge ..................
State and local taxes, net of federal tax benefit ...............................
Non-U.S. income tax rate differential .............................................
Impairment of goodwill without tax benefit ...................................
Tax on unremitted earnings ............................................................
Mexico manufacturing operations restructuring .............................
Nondeductible professional fees .....................................................
Tax deduction for stock of foreign subsidiary ................................
Other, net ........................................................................................
Provision for income taxes ................................................................. $
2017
2016
2015
71,413 $
49,000
(1,962)
292
(47,077)
—
12,202
—
1,240
—
(590)
84,518 $
43,146 $
—
—
(415)
(25,471)
3,088
2,747
—
313
(3,896)
(726)
18,786 $
37,432
—
—
1,907
(18,253 )
—
—
4,841
1,011
—
(856 )
26,082
Deferred income taxes are provided for the tax effects of temporary differences between the financial reporting bases and the
tax bases of the company’s assets and liabilities. Significant components of the company’s deferred tax assets and liabilities
at December 30, 2017 and December 31, 2016, are as follows:
(in thousands)
Deferred tax assets:
2017
2016
Accrued expenses ........................................................................................................ $
Foreign tax credit carryforwards ..................................................................................
Accrued restructuring ..................................................................................................
Capital losses ...............................................................................................................
Domestic and foreign net operating loss carryforwards ..............................................
Gross deferred tax assets..............................................................................................
Less: Valuation allowance ...........................................................................................
Total deferred tax assets ..................................................................................................
Deferred tax liabilities:
Tax depreciation and amortization in excess of book ..................................................
Tax on unremitted earnings .........................................................................................
Total deferred tax liabilities ............................................................................................
Net deferred tax (liabilities) assets .................................................................................. $
24,094 $
1,053
156
3,165
5,778
34,246
(6,203 )
28,043
21,254
12,000
33,254
(5,211 ) $
31,770
6,472
456
4,557
2,223
45,478
(6,738)
38,740
23,471
1,750
25,221
13,519
The deferred tax asset valuation allowance is related to a U.S. capital loss carryover (which expire in 2018) and tax attributes
of certain non-US subsidiaries which are not expected to be realized. The remaining net operating losses either have no
expiration date or are expected to be utilized prior to expiration (which begin expiring in 2021). The Company paid income
taxes of $31.8 million, $35.6 million, and $23.3 million in 2017, 2016, and 2015, respectively, and received income tax
refunds of $13.7 million in 2017.
Deferred income taxes are not provided on the excess of the investment value for financial reporting over the tax basis of
investments in those non-U.S. subsidiaries for which such excess is considered to be permanently reinvested in those
operations. As of December 30, 2017, unremitted earnings of the Company’s non-U.S. subsidiaries was approximately $680
million. The Company recognized deferred tax liabilities of $12.0 million ($11.8 million for non-U.S. taxes and $0.2 million
for U.S. state taxes) as of December 30, 2017 and $1.8 million as of December 31, 2016, related to taxes on certain non-U.S.
earnings which are not considered to be permanently reinvested. Some of these taxes may provide a U.S. federal income tax
benefit as a foreign tax credit. However, due to uncertainty in regard to the Tax Act’s provisions, no such tax benefit was
recorded. The Company will reconsider this provisional conclusion when it finalizes its preliminary reasonable estimate of
the impact of the Tax Act, based upon interpretations and administrative guidance as of that time.
The Company has three subsidiaries in China which benefit from lowered income tax rates due to “tax holidays” which apply
for three-year periods, subject to extension. One such tax holiday expires in 2018, and the Company expects to be granted an
68
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
extension. Such tax holidays contributed $5.7 million in tax benefits, or $0.25 per diluted share, during 2017, with similar
amounts expected in future years while such tax holidays are in effect.
A reconciliation of the beginning and ending amount of unrecognized tax benefits as of December 30, 2017, December 31,
2016, and January 2, 2016 is as follows:
(in thousands, except per share amounts)
Balance at January 2, 2016 ............................................................................................................................ $
Additions for tax positions taken in the current year .................................................................................
Additions for tax positions taken in the pre-acquisition periods of acquired subsidiaries .........................
Settlements .................................................................................................................................................
Balance at December 31, 2016 ...................................................................................................................... $
Additions for tax positions taken in the current year .................................................................................
Other ..........................................................................................................................................................
Balance at December 30, 2017 ...................................................................................................................... $
Unrecognized
Tax Benefits
3,532
2,696
2,491
(102)
8,617
370
(1,327)
7,660
The company recognizes accrued interest and penalties associated with uncertain tax positions as part of income tax expense.
The company recognized interest expense of $0.9 million, $0.9 million, and $0.2 million in 2017, 2016, and 2015,
respectively. Accrued interest was $3.3 million, $2.4 million, and $1.5 million as of December 30, 2017, December 31, 2016,
and January 2, 2016, respectively.
The amount of unrecognized tax benefits at December 30, 2017 was $7.7 million. This total represents the net amount of tax
benefits that, if recognized, would favorably affect the effective income tax rate in future periods. The company does not
expect any material decrease in unrecognized tax benefits in the next 12 months. None of the positions included in
unrecognized tax benefits are related to tax positions for which the ultimate deductibility is highly certain, but for which there
is uncertainty about the timing of such deductibility.
The U.S. federal statute of limitations remains open for 2014 onward although the company has been audited for 2014 (during
2016) and the audit concluded with no additional tax due. In late 2017, the U.S. Internal Revenue Service began an
examination of the Company’s federal income tax returns for 2015 and 2016 (with certain aspects of 2014 also subject to
review as a consequence of a carryback of tax attributes from 2016). Foreign and U.S. state statute of limitations generally
range from three to seven years. The German tax authority is currently conducting its examination for tax years 2011 through
2014. Other non-U.S. tax examinations occur from time to time, including one which is currently in process in Italy. The
company does not expect to recognize a significant amount of additional tax expense as a result of concluding any of these
examinations.
69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share:
(in thousands, except per share amounts)
Numerator:
2017
2016
2015
Net income as reported .................................................................. $
119,519 $
104,488 $
80,866
Denominator:
Weighted average shares outstanding
Basic ...............................................................................................
Effect of dilutive securities .............................................................
Diluted ............................................................................................
22,687
244
22,931
22,559
168
22,727
22,565
154
22,719
Earnings Per Share:
Basic earnings per share ..................................................................... $
Diluted earnings per share .................................................................. $
5.27 $
5.21 $
4.63 $
4.60 $
3.58
3.56
Potential shares of common stock attributable to stock options excluded from the earnings per share calculation because their
effect would be anti-dilutive were 37,443 shares, 53,448 shares, and 113,130 shares in 2017, 2016, and 2015, respectively.
On January 17, 2018, the Company acquired IXYS through a combination of cash, Littelfuse common stock, and the value
of converted, or cash settled IXYS equity awards. The Company issued approximately 2.1 million shares of Littelfuse
common stock and converted IXYS equity awards into approximately 0.5 million Littelfuse equity awards.
12. Segment Information
The Company and its subsidiaries design, manufacture and sell components and modules for circuit protection, power control
and sensing throughout the world. The Company reports its operations by the following segments: Electronics, Automotive,
and Industrial. An operating segment is defined as a component of an enterprise that engages in business activities from which
it may earn revenues and incur expenses, and about which separate financial information is regularly evaluated by the Chief
Operating Decision Maker (“CODM”) in deciding how to allocate resources. The CODM is the Company’s President and
Chief Executive Officer (“CEO”). The CODM allocates resources to and assesses the performance of each operating segment
using information about its revenue and operating income (loss) before interest and taxes, but does not evaluate the operating
segments using discrete balance sheet information.
Sales, marketing, and research and development expenses are charged directly into each operating segment. Manufacturing,
purchasing, logistics, customer service, finance, information technology, and human resources are shared functions that are
allocated back to the three operating segments. The Company does not report inter-segment revenue because the operating
segments do not record it. Certain expenses, determined by the CODM to be strategic in nature and not directly related to
segments current results, are not allocated but identified as “Other”. Additionally, the Company does not allocate interest
and other income, interest expense, or taxes to operating segments. These costs are not allocated to the segments, as
management excludes such costs when assessing the performance of the segments. Although the CODM uses operating
income (loss) to evaluate the segments, operating costs included in one segment may benefit other segments. Except as
discussed above, the accounting policies for segment reporting are the same as for the Company as a whole.
● Electronics Segment: Consists of one of the broadest product offerings in the industry, including fuses and fuse
accessories, positive temperature coefficient (“PTC”) resettable fuses, polymer electrostatic discharge (“ESD”)
suppressors, varistors, gas discharge tubes; semiconductor and power semiconductor products such as discrete
transient voltage suppressor (“TVS”) diodes, TVS diode arrays, protection and switching thyristors, silicon carbide,
metal-oxide-semiconductor field-effect transistors (“MOSFETs”) and silicon carbide diodes; and insulated gate
bipolar transistors (“IGBT”) technologies. The segment covers a broad range of end markets, including consumer
electronics, automotive electronics, IT and telecommunications equipment, medical devices, lighting products, and
white goods.
70
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
● Automotive Segment: Consists of a wide range of circuit protection, power control and sensing technologies for
global original equipment manufacturers (“OEMs”), Tier-I suppliers and parts distributors in the automotive,
commercial vehicle, and agricultural and construction equipment industries. Passenger car fuse products include
fuses and fuse accessories, including blade fuses, battery cable protectors, varistors, high-current fuses, and high-
voltage fuses for hybrid and electric vehicles. Commercial vehicle products include fuses, switches, relays, and
power distribution modules for the commercial vehicle industry. Automotive sensor products include a wide range
of automotive and commercial vehicle sensors designed to monitor the passenger compartment occupants and
environment as well as the vehicle’s powertrain, emissions, speed and suspension.
●
Industrial Segment: Consists of power fuses, protection relays and controls and other circuit protection products for
use in heavy industrial applications such as mining, oil and gas, energy storage, construction, HVAC systems,
elevator and other industrial equipment.
The Company has provided this segment information for all comparable prior periods. Segment information is summarized
as follows:
(in thousands)
Net sales
2017
2016
2015
Electronics ...................................................................................... $
Automotive .....................................................................................
Industrial .........................................................................................
Total net sales ..................................................................................... $
661,928 $
453,227
106,379
1,221,534 $
535,191 $
415,200
105,768
1,056,159 $
405,497
339,957
122,410
867,864
Depreciation and amortization
Electronics ...................................................................................... $
Automotive .....................................................................................
Industrial .........................................................................................
Total depreciation and amortization ................................................... $
35,215 $
22,459
5,337
63,011 $
29,141 $
18,107
5,889
53,137 $
Operating income (loss)
Electronics ...................................................................................... $
Automotive .....................................................................................
Industrial .........................................................................................
Other(a) ............................................................................................
Total operating income .......................................................................
Interest expense ..................................................................................
Foreign exchange loss (gain) .............................................................
Other (income) expense, net ...............................................................
Income before income taxes ............................................................... $
155,880 $
62,571
10,334
(10,274)
218,511
13,380
2,376
(1,282)
204,037 $
117,088 $
59,905
3,615
(49,964)
130,644
8,628
472
(1,730)
123,274 $
22,936
13,437
5,268
41,641
78,194
53,086
18,094
(45,217 )
104,157
4,091
(1,465 )
(5,417 )
106,948
(a) Included in “Other” Operating income (loss) for 2017 are costs related to the acquisition and integration costs associated
with the Company’s completed and pending acquisitions ($8.0 million in Cost of sales (“COS”) and Selling, general, and
administrative expenses (“SG&A”) and charges related to restructuring and production transfers in the Company’s Asia
operations ($2.2 million in SG&A).
Included in “Other” Operating income (loss) for 2016 are costs related to the impairment of the Custom Products reporting
unit ($14.8 million), acquisition and integration costs associated with the Company’s 2016 acquisitions ($29.2 million in
COS and SG&A), transfer of the Company’s reed switch manufacturing operations from its Lake Mills, Wisconsin and
Suzhou, China locations to the Philippines ($1.6 million in COS), impairment and severance costs related to the closure
of the Company’s manufacturing facility in Denmark ($1.9 million in SG&A), and restructuring costs ($2.5 million in
SG&A and Research and development expenses).
Included in “Other” Operating income (loss) for 2015 are costs related to the transfer of the Company’s reed switch
manufacturing operations from its Lake Mills, Wisconsin and Suzhou, China locations to the Philippines ($5.2 million in
COS), acquisition related fees ($4.6 million included in SG&A), pension settlement and other costs ($31.9 million in
SG&A), and restructuring costs ($3.6 million in SG&A).
71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company’s significant net sales, long-lived assets and additions to long-lived assets by country for the fiscal years ended
2017, 2016, and 2015 are as follows:
(in thousands)
Net sales
2017
2016
2015
United States ................................................................................... $
China ...............................................................................................
Other countries................................................................................
Total net sales ..................................................................................... $
383,025 $
321,111
517,398
1,221,534 $
356,674 $
263,701
435,784
1,056,159 $
Long-lived assets
United States ................................................................................... $
China ...............................................................................................
Mexico ............................................................................................
Philippines ......................................................................................
Other countries................................................................................
Total long-lived assets ........................................................................ $
Additions to long-lived assets
United States ................................................................................... $
China ...............................................................................................
Mexico ............................................................................................
Philippines ......................................................................................
Other countries................................................................................
Total additions to long-lived assets .................................................... $
23,490 $
86,310
62,510
31,129
47,138
250,577 $
3,518 $
32,775
19,395
2,979
7,258
65,925 $
23,731 $
65,345
52,262
33,345
42,492
217,175 $
4,694 $
13,181
15,667
5,096
7,590
46,228 $
344,305
193,792
329,767
867,864
23,965
37,241
47,130
33,525
20,707
162,568
8,609
9,710
9,193
12,620
3,887
44,019
For the year ended December 30, 2017, approximately 69% of the Company’s net sales were to customers outside the United
States (exports and foreign operations) including 26% to China (including Hong Kong). Sales to Arrow Electronics, Inc.,
which were included in the Electronics, Automotive, and Industrial segments, were 10.6% of consolidated net sales in 2017
but less than 10% for 2016 and 2015. No other single customer accounted for more than 10% of net sales during the last three
years.
72
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Selected Quarterly Financial Data (Unaudited)
The quarterly periods for 2017 are for the 13-weeks ended December 30, 2017, September 30, 2017, July 1, 2017, and April
1, 2017, respectively. The quarterly periods for 2016 are for the 13-weeks ended December 31, 2016, October 1, 2016, July
2, 2016, and April 2, 2016, respectively.
(in thousands, except per share data)
4Q(a)
3Q(b)
2017
2Q(c)
1Q(d)
4Q(e)
3Q(f)
2016
2Q(g)
1Q(h)
Net sales ........................ $ 304,849 $ 317,889 $ 313,355 $ 285,441 $ 284,518 $ 280,331 $ 271,912 $ 219,398
Gross profit .................... 126,624 133,651 132,608 113,650 114,337 113,759 97,866 87,155
Operating income .......... 50,780 58,609 60,270 48,852 40,988 27,526 29,702 32,428
Net income/(loss) .......... (10,819) 42,808 48,638 38,891 27,245 30,802 27,152 19,289
Net income/(loss per
share
Basic .......................... $
Diluted ....................... $
(0.48) $
(0.48) $
1.88 $
1.87 $
2.13 $
2.11 $
1.71 $
1.69 $
1.20 $
1.19 $
1.36 $
1.35 $
1.21 $
1.20 $
0.86
0.85
(a) In the fourth quarter of 2017, the Company recorded an estimated one-time tax charge of $49 million for the enactment
of the Tax Cuts and Jobs Act for deemed repatriation of unremitted earnings of foreign subsidiaries, $1.4 million in
acquisition and integration costs and $0.7 million in restructuring and production costs related to the transfer of Asian
operations.
(b) In the third quarter of 2017, the Company recorded $4.8 million in acquisition and integration costs and $1.5 million in
restructuring and production costs related to the transfer of Asian operations.
(c) In the second quarter of 2017, the Company recorded $0.3 million in acquisition and integration costs.
(d) In the first quarter of 2017, the Company $1.5 million in acquisition and integration costs
(e) In the fourth quarter of 2016, the Company recorded ($0.1) million gain related to the Company’s transfer of its reed
sensor manufacturing operations from the U.S. and China to the Philippines, $1.2 million of restructuring costs, $3.2
million in acquisition and integration costs and $0.3 million in non-cash inventory charges related to the 2016
acquisitions.
(f) In the third quarter of 2016, the Company recorded $0.9 million of restructuring costs, $5.9 million in acquisition and
integration costs, $14.8 million of charges related to the impairment of the Custom Products reporting unit and $0.5
million in non-cash inventory charges as noted above.
(g) In the second quarter of 2016, the Company recorded $0.7 million related to the reed sensor manufacturing transfer as
noted above, $0.1 million of restructuring costs, $6.1 million in acquisition and integration costs, $0.3 million in charges
related to the closure of the manufacturing facility in Denmark and $6.9 million in non-cash inventory charges as noted
above.
(h) In the first quarter of 2016, the Company recorded $1.0 million related to the reed sensor manufacturing transfer as noted
above, $0.4 million of restructuring costs, $6.2 million in acquisition and integration costs, and $1.6 million in charges
related to the closure of the manufacturing facility in Denmark.
73
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be
disclosed in its reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and
communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate,
to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and
procedures, the Company recognizes that any controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving the desired control objectives, and the Company is required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
As required by SEC Rule 15d-15(b), the Company carried out an evaluation, under the supervision and with the participation
of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and
operation of its disclosure controls and procedures pursuant to SEC Rule 13a-15 as of the end of the period covered by this
report. Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the
Company’s disclosure controls and procedures were effective as of December 30, 2017.
Management’s Report on Internal Control over Financial Reporting
Section 404 of the Sarbanes-Oxley Act of 2002 requires management to include in this Annual Report on Form 10-K a report
on management’s assessment of the effectiveness of the Company’s internal control over financial reporting, as well as an
attestation report from the Company’s independent registered public accounting firm on the effectiveness of the Company’s
internal control over financial reporting. Management is responsible for establishing and maintaining adequate internal
control over financial reporting as such term is defined in Exchange Act Rule 13a-15(f) and 15d-15(f). The Company’s
internal control system was designed to provide reasonable assurance to its management and the Board of Directors regarding
the preparation and fair presentation of published financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems
determined effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
A material weakness is a deficiency, or a combination of deficiencies, in the internal control over financial reporting such
that there is a reasonable possibility that a material misstatement of the annual or interim financial statement will not be
prevented or detected on a timely basis.
The Company’s management, including the its Principal Executive Officer and Principal Financial Officer, assessed the
effectiveness of the Company’s internal control over financial reporting as of December 30, 2017, based upon the updated
framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”) in 1992 and updated in May 2013. Based on this assessment, the Company’s management
concluded that, as of December 30, 2017, the Company’s internal control over financial reporting was effective.
Changes in Internal Control over Financial Reporting
There has been no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-
15(f) under the Exchange Act) that occurred during the 12 months or fiscal quarter ended December 30, 2017, that has
materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
None.
74
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.
Except as set forth below, the information required by this item will be contained in the Company’s 2017 Proxy Statement
and is incorporated herein by reference.
Information concerning directors and nominees for director is set forth in the section titled “Proposal No. 1 Election of
Directors” in the Company’s proxy statement and is incorporated herein by reference.
Information concerning the Company’s Audit Committee and Audit Committee financial expert is set forth in the section
titled “Director Independence; Financial Experts” in its proxy statement and is incorporated herein by reference.
Information concerning the procedures by which security holders may recommend nominees to the Company’s Board of
Directors is set forth in the section titled “Director Candidates” in the Company’s proxy statement and is incorporated herein
by reference.
Information concerning compliance with Section 16 of the Securities Exchange Act of 1934 is set forth in the section titled
“Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s proxy statement and is incorporated herein
by reference.
Executive Officers of the Registrant.
The executive officers of the Company are as follows:
Name
David W. Heinzmann
Meenal A. Sethna
Ryan K. Stafford
Matthew J. Cole
Ian Highley
Deepak Nayar
Michael P. Rutz
Age
54
48
50
46
54
58
46
Position
President and Chief Executive Officer
Executive Vice President and Chief Financial Officer
Executive Vice President, Chief Legal and Human Resources Officer and
Corporate Secretary
Senior Vice President and General Manager, Industrial Business Unit
Senior Vice President and General Manager, Semiconductor Products and Chief
Technology Officer
Senior Vice President and General Manager, Electronics Business Unit
Senior Vice President, Global Operations
David W. Heinzmann has served as the President and Chief Executive Officer and a member of the Board of Directors since
January 2017. He previously served as the Company’s Chief Operating Officer, since 2014. Mr. Heinzmann began his career
at Littelfuse in 1985 as a manufacturing engineer and has held positions of increasing responsibility since that time. From
2004 through 2007, he served as Vice President and General Manager, Automotive segment, and then as Vice President,
Global Operations until 2014. Mr. Heinzmann has served on the board of directors of Pulse Electronics Corporation, since
2014. Mr. Heinzmann holds a BS in mechanical engineering from Missouri University of Science and Technology.
Meenal A. Sethna, Executive Vice President and Chief Financial Officer since March, 2016, leads the company’s finance,
accounting, internal audit, investor relations and information technology functions. Ms. Sethna joined the company in 2015
as Senior Vice President of Finance. Prior to joining Littelfuse, Ms. Sethna spent four years at Illinois Tool Works Inc. as
Vice President and Corporate Controller. Previous to that, she worked at Motorola Inc., most recently as Vice President,
Finance. She began her career at Baxter International, holding a variety of finance roles during her tenure. Ms. Sethna is a
graduate of the Kellogg School of Management at Northwestern University and the University of Illinois-Urbana, and is a
Certified Public Accountant in Illinois.
Ryan K. Stafford, Executive Vice President, Chief Legal and Human Resources Officer and Corporate Secretary, leads the
company’s legal, compliance, human resources and corporate marketing and communications functions. Mr. Stafford joined
the company’s executive team as its first general counsel in January 2007. Prior to joining the company, Mr. Stafford served
in a number of roles at Tyco International Ltd., including Vice President of China Operations and Vice President & General
Counsel for its Engineered Products & Services Business Segment. Prior to that he was with the law firm Sulloway & Hollis
P.L.L.C.
75
Matthew J. Cole, Senior Vice President and General Manager, Industrial Business Unit, joined Littelfuse in July 2015 and
is responsible for the electrical fuse, protection relay and custom electrical products businesses. Mr. Cole has more than 20
years of experience in general management, strategy development, mergers and acquisitions, and operations. Prior to joining
Littelfuse, he was Vice President and General Manager of AMETEK’s Advanced Measurement Technology division, a global
leader in electronic instruments and electromechanical devices. His career also includes positions in general management,
marketing and operations at Danaher and Allied Signal/Honeywell.
Ian Highley, Senior Vice President and General Manager, Semiconductor Products and Chief Technology Officer, is
responsible for the marketing, sales, product development and strategic planning efforts of the company’s semiconductor
products in addition to being responsible for the company’s overall R&D and technology efforts. Mr. Highley joined the
company in 2002 as Product Line Director, Semiconductor Products. Mr. Highley served as General Manager Semiconductor
Products from August 2008 to May 2012 and Vice President and General Manager, Semiconductor Products from May 2012
to January 2015. Mr. Highley was promoted to his current position in January 2015.
Deepak Nayar, Senior Vice President and General Manager, Electronics Business Unit, is responsible for marketing, sales,
product development and customer relationships of the Electronics Business Unit. Mr. Nayar joined the company in 2005 as
Business Line Director of the Electronics Business Unit. In July 2007, Mr. Nayar was promoted to Vice President, Global
Sales, Electronics Business Unit, before he was promoted to his current position in 2011. Prior to joining the company, Mr.
Nayar served as Worldwide Sales Director of Tyco Electronics Power Components Division from 1999 to 2005. Before that,
Mr. Nayar served as Director of Business Development, Raychem Electronics OEM Group from 1997 to 1999.
Michael P. Rutz, Senior Vice President, Global Operations, is responsible for the company’s sourcing, supplier development,
supply chain, quality and manufacturing engineering services. From February 2014 to January 2015, Mr. Rutz was Vice
President of Supply Chain and Operational Excellence. From August 2011 to February 2014, Mr. Rutz was Senior Vice
President Global Supply Chain at WMS Industries Inc., a Chicago-based manufacturer of equipment and software for the
gaming industry. Prior to that, Mr. Rutz served for 16 years in various positions of increasing responsibility, at Motorola
Solutions, Inc., most recently as Vice President of Networks Supply Chain from 2009 until August 2011.
Code of Ethics
The company has adopted a Code of Conduct (Code of Ethics) that applies to all of the Company’s employees including the
Company’s Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer and persons performing
similar functions. It has posted the text of the Code of Conduct on its website at http://investor.littelfuse.com/governance.cfm
and intends to disclose on such website any amendments to, or waivers from the Code of Conduct. The company’s website
is not incorporated by reference into this Annual Report.
ITEM 11. EXECUTIVE COMPENSATION.
Information concerning compensation of the Company’s executive officers and directors for the year ended December 30,
2017, is set forth in the sections titled “Compensation Discussion & Analysis,” “Compensation Tables” and “Director
Compensation” in the Company’s proxy statement and is incorporated herein by reference, except the section titled
“Compensation Committee Report” is hereby “furnished” and not “filed” with this Annual Report on Form 10-K.
Information concerning compensation committee interlocks is set forth in the section titled “Compensation Committee
Interlocks and Insider Participation” in the Company’s proxy statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
Information concerning the security ownership of certain beneficial owners, the Company’s directors and executive officers
as of March 1, 2018, is set forth in the section titled “Ownership of Littelfuse, Inc. Common Stock” in the Company’s proxy
statement and is incorporated herein by reference.
Information concerning the Company’s equity compensation plan is set forth in the section titled “Compensation Plan
Information” in the Company’s proxy statement and is incorporated herein by reference.
76
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Information concerning the independence of the Company’s directors, certain relationships and related transactions during
2017 and the Company’s policies with respect to such transactions is set forth in the sections titled “Proposal No. 1 Election
of Directors” and “Certain Relationships and Related Transactions” in the Company’s proxy statement and is incorporated
herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Information concerning principal accountant fees and services is set forth in the section titled “Audit Related Matters” in the
Company’s proxy statement and is incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) Financial Statements and Schedules
(1) The following Financial Statements are filed as a part of this report:
Reports of Independent Registered Public Accounting Firms (pages 35-36).
(i)
(ii) Consolidated Balance Sheets as of December 30, 2017 and December 31, 2016 (page 37).
(iii) Consolidated Statements of Net Income for the years ended December 30, 2017, December 31, 2016 and
January 2, 2016 (page 38).
(iv) Consolidated Statements of Comprehensive Income for the years ended December 30, 2017, December 31,
2016 and January 2, 2016 (page 38).
(v) Consolidated Statements of Cash Flows for the years ended December 30, 2017, December 31, 2016 and
January 2, 2016 (page 39).
(vi) Consolidated Statements of Equity for the years ended December 30, 2017, December 31, 2016 and January
2, 2016 (page 40).
(vii) Notes to Consolidated Financial Statements (pages 41-73).
(2) The following Financial Statement Schedule is submitted herewith for the periods indicated therein.
(i)
Schedule II - Valuation and Qualifying Accounts and Reserves (page 78).
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange
Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted.
(3) Exhibits. See Exhibit Index on pages 80-86.
Item 16. FORM 10-K SUMMARY
None.
77
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Description
(in thousands)
Year ended December 30, 2017
Balance at
Beginning
of Year
Charged to
Costs and
Expenses
(a)
Deductions
(b)
Other (c)
Balance at
End
of Year
Allowance for losses on accounts receivable .. $
Reserves for sales discounts and allowances .. $
Deferred tax valuation allowance .................... $
2,079 $
23,825 $
6,738 $
3,068 $
(4,070) $
106,781 $ (104,941) $
— $
— $
95 $
679 $
(535) $
1,172
26,344
6,203
Year ended December 31, 2016
Allowance for losses on accounts receivable .. $
Reserves for sales discounts and allowances .. $
Deferred tax valuation allowance .................... $
319 $
17,168 $
4,557 $
1,769 $
91,632 $
— $
(42) $
(90,837) $
— $
33 $
5,862 $
2,181 $
2,079
23,825
6,738
Year ended January 2, 2016
Allowance for losses on accounts receivable .. $
Reserves for sales discounts and allowances .. $
Deferred tax valuation allowance .................... $
278 $
19,140 $
4,557 $
164 $
81,335 $
— $
150 $
82,997 $
— $
27 $
(310) $
— $
319
17,168
4,557
(a) Includes provision for doubtful accounts, sales returns and sales discounts granted to customers.
(b) Represents uncollectible accounts written off, net of recoveries and credits issued to customers and the write-off of
certain deferred tax assets that previously had full valuation allowances.
(c) Represents business acquisitions, U.S. and non-U.S. subsidiary tax attributes and foreign currency translation
adjustments.
78
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Littelfuse, Inc.
By: /s/ David W. Heinzmann
David W. Heinzmann,
President and Chief Executive Officer
Date: February 23, 2018
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant on February 23, 2018 and in the capacities indicated.
/s/ Gordon Hunter
Gordon Hunter
/s/ David W. Heinzmann
David W. Heinzmann
/s/ Tzau-Jin Chung
Tzau-Jin Chung
/s/ Cary T. Fu
Cary T. Fu
/s/ Anthony Grillo
Anthony Grillo
/s/ John E. Major
John E. Major
/s/ William P. Noglows
William P. Noglows
/s/ Ronald L. Schubel
Ronald L. Schubel
/s/ Nathan Zommer
Nathan Zommer
/s/ Meenal A. Sethna
Meenal A. Sethna
/s/ Jeffrey G. Gorski
Jeffrey G. Gorski
Chairman of the Board of Directors
Director, President and Chief Executive Officer
(Principal Executive Officer)
Director
Director
Director
Director
Director
Director
Director
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Corporate Controller and Chief Accounting Officer
(Principal Accounting Officer)
79
The following documents listed below that have been previously filed with the SEC (1934 Act File No. 0-20388) are
incorporated herein by reference:
EXHIBIT INDEX
Exhibit No.
2.1+
Description
Stock Purchase Agreement, dated as of April 15,
2013, by and among Littelfuse, Inc. and Key Safety
Systems, Inc.
Stock and Asset Purchase Agreement, dated
November 7, 2015, by and between Littelfuse, Inc.
and TE Connectivity Ltd.
Agreement and Plan of Merger, dated August 25,
2017, as amended by Amendment No. 1, dated
December 4, 2017, by and among IXYS
Corporation, Littelfuse, Inc., Iron Merger Co., Inc.,
and IXYS Merger Co., LLC.
Certificate of Incorporation dated November 25,
1991, as amended April 25, 1997.
Certificate of Designations of Series A Preferred
Stock.
Bylaws, as amended and restated October 24, 2014.
Form of Non-Qualified Stock Option Agreement
under the 1993 Stock Plan for Employees and
Directors of Littelfuse, Inc. for employees.++
Form of Non-Qualified Stock Option Agreement
under the 1993 Stock Plan for Employees and
Directors of Littelfuse, Inc., for non-employee
directors. ++
Form of Non-Qualified Stock Option Agreement
under the Littelfuse, Inc. Equity Incentive
Compensation Plan. ++
Form of Non-Qualified Stock Option Agreement
under the Littelfuse, Inc. Outside Directors Stock
Option Plan.++
2.2+
2.3+
3.1
3.2
3.3
10.1
10.2
10.3
10.4
Incorporated by Reference Herein
Form
8-K
Exhibit Filing Date
04/15/2013
2.1
File No.
0-20388
8-K
2.1
11/12/2015
0-20388
S-4/A Annex A 12/11/2017
333-22114
10-K
8-K
10-Q
8-K
3.1
4.2
02/27/2017
0-20388
12/01/1995
0-20388
3.1
99.1
10/31/2014
11/12/2004
0-20388
0-20388
10-K
10.24
03/17/2005
0-20388
8-K
99.4
05/11/2006
0-20388
8-K
99.6
05/11/2006
0-20388
10.5
Amended and Restated Employment Agreement
10-K
10.1
02/27/2008
0-20388
10.6
10.7
10.8
dated as of December 31, 2007, between Littelfuse,
Inc. and Gordon Hunter .++
Littelfuse, Inc. Retirement Plan as Amended and
Restated, effective January 1, 2008 .++
Form of Stock Option Award Agreement under the
Littelfuse, Inc. Outside Directors' Equity Plan.++
Form of Restricted Stock Unit Award Agreement
under the Littelfuse, Inc. Outside Directors' Equity
Plan.++
10-K
10.13
02/27/2008
0-20388
8-K
8-K
99.3
05/01/2008
0-20388
99.4
05/01/2008
0-20388
10.9
Amended and Restated, Littelfuse, Inc. Deferred
10-K
10.4
02/27/2008
0-20388
10.10
10.11
Compensation Plan for Non-Employee Directors.++
Form of Restricted Stock Award Agreement under
the Littelfuse, Inc. Equity Incentive Compensation
Plan .++
Form of Stock Option Award Agreement under the
Littelfuse, Inc. Equity Incentive Compensation Plan
.++
8-K
10.1
04/28/2009
0-20388
8-K
10.2
04/28/2009
0-20388
80
Exhibit No.
10.12
10.13
10.14
10.15
10.16
10.17
Description
First Amendment to the Amended and Restated
Littelfuse, Inc. Retirement Plan, effective March 25,
2009.++
Littelfuse, Inc. Long-Term Incentive Plan, effective
February 3, 2010.++
Form of Restricted Stock Unit Award Agreement
(Outside Director) under the Littelfuse, Inc. Long-
Term Incentive Plan.++
Form of Stock Option Award Agreement under the
Littelfuse, Inc. Long-Term Incentive Plan.++
First Amendment to the Littelfuse, Inc. Long-Term
Incentive Plan, effective July 27, 2012.++
Credit Agreement, dated as of May 31, 2013, among
Littelfuse, Inc., as borrower, JPMorgan Chase Bank,
N.A. as Agent, Bank of America, N.A., as
Syndication Agent, Wells Fargo Bank, National
Association and PNC Bank, National Association, as
Co-Documentation Agents, J.P. Morgan Securities
LLC, as Sole Bookrunner and Joint Lead Arranger,
and Merrill, Lynch, Pierce, Fenner & Smith
Incorporated, as Joint Lead Arranger.
10.18
10.19
Master Increasing Lender Supplement, dated as of
January 30, 2014, among Littelfuse, Inc., as
borrower, JPMorgan Chase Bank, N.A. as
Administrative Agent, and each of the banks,
financial institutions and other institutional lenders
listed on the respective signature pages thereof.
Littelfuse, Inc. Annual Incentive Plan, effective
January 1, 2014. ++
Incorporated by Reference Herein
Form
10-K
Exhibit Filing Date
02/26/2010
10.30
File No.
0-20388
8-K
10.1
05/05/2010
0-20388
S-8
4.4
05/19/2010
0-20388
S-8
4.6
05/19/2010
0-20388
10-K
10.36
02/27/2013
0-20388
8-K
10.1
06/05/2013
0-20388
8-K
10.1
02/04/2014
0-20388
DEF14A
A
03/17/2014
0-20388
10.20
Amended and Restated Employment Agreement,
10-Q
10.2
05/02/2014
0-20388
10.21
10.22
10.23
10.24
10.25
10.26
10.27
effective as of January 1, 2014, between Littelfuse
Europe GmbH and Dieter Roeder .++
Change of Control Agreement effective as of
February 10, 2014, between Littelfuse, Inc. and
Michael Rutz.++
Termination Amendment to the Littelfuse, Inc.
Retirement Plan, effective July 31, 2014. ++
Change of Control Agreement effective as of
January 1, 2015, between Littelfuse, Inc. and Gordon
Hunter.++
Change of Control Agreement effective as of
January 1, 2015, between Littelfuse, Inc. and Philip
G. Franklin.++
Change of Control Agreement effective as of
January 1, 2015, between Littelfuse, Inc. and Dieter
Roeder.++
Change of Control Agreement effective as of
January 1, 2015, between Littelfuse, Inc. and Ryan
K. Stafford.++
Change of Control Agreement effective as of
January 1, 2015, between Littelfuse, Inc. and Ian
Highley.++
10-Q
10.1
05/02/2014
0-20388
10-Q
10.1
10/31/2014
0-20388
8-K
10.1
12/22/2014
0-20388
8-K
10.2
12/22/2014
0-20388
8-K
10.4
12/22/2014
0-20388
8-K
10.5
12/22/2014
0-20388
10-K
10.11
02/24/2015
0-20388
81
Exhibit No.
10.28
Description
Change of Control Agreement effective as of
January 1, 2015, between Littelfuse, Inc. and Deepak
Nayar.++
Incorporated by Reference Herein
Form
10-K
Exhibit Filing Date
02/24/2015
10.12
File No.
0-20388
10.29
Amendment No. 1, dated as of May 2, 2014, to
10-K
10.47
02/24/2015
0-20388
Credit Agreement, dated as of May 30, 2013, by and
among Littelfuse, Inc., as borrower, JPMorgan
Chase Bank, N.A. as Agent, and each of the banks,
financial institutions listed on the respective
signature pages thereof.
Amendment No. 2, dated as of January 14, 2015, to
Credit Agreement, dated as of May 31, 2013, by and
among Littelfuse, Inc., as borrower, JPMorgan
Chase Bank, N.A. as Agent, and each of the banks,
financial institutions listed on the respective
signature pages thereof.
Form of Restricted Stock Unit Award Agreement
(Executive) under the Littelfuse, Inc. Long-Term
Incentive Plan.++
Form of Restricted Stock Unit Award Agreement
(Tier II Management) under the Littelfuse, Inc.
Long-Term Incentive Plan.++
10.30
10.31
10.32
10-K
10.48
02/24/2015
0-20388
10-Q
10.2
07/31/2015
0-20388
10-Q
10.3
07/31/2015
0-20388
10.33
Amendment No. 3, dated as of May 4, 2015, to
10-Q
10.1
07/31/2015
0-20388
10.34
10.35
10.36
10.37
10.38
10.39
Credit Agreement, dated as of May 31, 2013, by and
among Littelfuse, Inc., as borrower, JPMorgan
Chase Bank, N.A., as Agent, and each of the banks,
financial institutions listed on the respective
signature pages thereof.
Change of Control Agreement effective as of
February 1, 2016, between Littelfuse, Inc. and
Meenal A. Sethna. ++
Change of Control Agreement effective as of May
26, 2015 between Littelfuse, Inc. and Matt Cole.++
Credit Agreement, dated as of March 4, 2016 among
Littelfuse, Inc. and Certain Subsidiaries as
borrowers, Guarantors party thereto, Bank of
America, N.A. as Agent, Swing Line Lender and
L/C Issuer and JPMorgan Chase Bank, N.A. as
Syndication Agent, BMO Harris Bank, N.A., PNC
Bank, National Association and Wells Fargo Bank,
National Association as Co-Documentation
Agents, Merril, Lynch, Pierce, Fenner & Smith
Incorporated, as Sole Bookrunner and Joint Lead
Arranger and JPMorgan Chase Bank, N.A., as Joint
Lead Arranger.
Form of Stock Option Award Agreement
(Executive) under the Littelfuse, Inc. Long-Term
Incentive Plan. ++
Form of Stock Option Award Agreement (Outside
Director – 2016 Grant) under the Littelfuse, Inc.
Long-Term Incentive Plan. ++
Form of Restricted Stock Unit Award Agreement
(Executive) under the Littelfuse, Inc. Long-Term
Incentive Plan. ++
82
8-K
10.1
02/03/2016
0-20388
10-K
10.13
03/01/2016
0-20388
8-K
10.1
03/10/2016
0-20388
10-Q
10.3
05/06/2016
0-20388
10-Q
10.4
05/06/2016
0-20388
10-Q
10.5
05/06/2016
0-20388
Exhibit No.
10.40
10.41
10.42
10.43
10.44
10.45
10.46
10.47
10.48
10.49
10.50
Description
Form of Restricted Stock Unit Award Agreement
(Tier II Management) under the Littelfuse, Inc.
Long-Term Incentive Plan. ++
Form of Restricted Stock Unit Award Agreement
(Outside Director – 2016 Grant) under the Littelfuse,
Inc. Long-Term Incentive Plan. ++
Form of Restricted Stock Unit Award Agreement
(Executive) under the Littelfuse Inc. Long-Term
Incentive Plan. ++
Executive Retirement Agreement entered into
between Littelfuse, Inc. and Gordon Hunter,
effective January 1, 2017. ++
Letter Agreement entered into between Littelfuse,
Inc. and David W. Heinzmann. Effective January 1,
2017. ++
Change of Control Agreement effective as of
January 1, 2017, between Littelfuse, Inc. and David
W. Heinzmann. ++
Littelfuse, Inc. 3.03% Senior Note, Series A, due
February 15, 2022, and 3.74% Senior Note, Series B,
due February 15, 2027 Note Purchase Agreement.
Littelfuse, Netherland C.V. 1.14% Senior Note,
Series A, due December 8, 2023, and 1.83% Senior
Note, Series B, due December 8, 2028 Note
Purchase Agreement.
Subsidiary Guaranty Agreement, dated December 8,
2016.
Subsidiary Guaranty Agreement, dated as of
February 15, 2017.
Restated Littelfuse, Inc. Supplemental Retirement
and Savings Plan, effective January 1, 2017. ++
Incorporated by Reference Herein
Form
10-Q
Exhibit Filing Date
05/06/2016
10.6
File No.
0-20388
10-Q
10.7
05/06/2016
0-20388
8-K
10.1
07/26/2016
0-20388
8-K
10.1
11/16/2016
0-20388
8-K
10.2
11/16/2016
0-20388
8-K
10.3
11/16/2016
0-20388
8-K
10.1
12/09/2016
0-20388
8-K
10.2
12/09/2016
0-20388
8-K
8-K
10.4
12/09/2016
0-20388
10.2
2/15/2017
0-20388
10-K
10.50
02/27/2017
0-20388
10.51
Amended and Restated Littelfuse, Inc. 401(k)
10-K
10.51
02/27/2017
0-20388
Retirement and Savings Plan, effective January 1,
2017.++
10.52
Amended and Restated Littelfuse, Inc. Long-Term
8-K
10.1
05/01/2017
0-20388
10.53
10.54
10.55
10.56
Incentive Plan. ++
Form of 2017 Restricted Stock Unit Award
Agreement. ++
Form of 2017 Stock Option Award Agreement. ++
Amended and Restated Employment Agreement,
effective as of April 18, 2017, between Littelfuse,
Inc. and Dieter Roeder. ++
Employment offer letter between Littelfuse, Inc. and
Jeffrey Gorski, dated June 28, 2017. ++
8-K
10.2
05/01/2017
0-20388
8-K
10-Q
10.3
10.1
05/01/2017
08/02/2017
0-20388
0-20388
8-K
10.1
08/14/2017
0-20388
83
Exhibit No.
10.57
10.58
Description
Form of Change of Control Agreement (J. Gorski).
++
First Amendment to Credit Agreement, dated as of
November 1, 2016, among Littelfuse, Inc., certain
subsidiaries of the company, as designated
borrowers, certain subsidiaries of the company, as
guarantors, the lenders party thereto and Bank of
America, N.A., as agent.
Second Amendment to Credit Agreement, dated as
of October 13. 2017, among Littelfuse, Inc., certain
subsidiaries of the company, as designated
borrowers, certain subsidiaries of the company, as
guarantors, the lenders party thereto and Bank of
America, N.A., as agent.
Joinder Agreement, dated as of October 13, 2017, by
and between Iron Merger Co., Inc. and Bank of
America, N.A., as agent.
Joinder Agreement, dated as of October 13, 2017, by
and between IXYS Merger Co., LLC and Bank of
America, N.A., as agent.
U.S. Subsidiary Guarantor Supplement, dated as of
October 13, 2017, made by Iron Merger Co., Inc. in
favor of the note purchasers and the other holders.
U.S. Subsidiary Guarantor Supplement, dated as of
October 13, 2017, made by IXYS Merger Co., LLC
in favor of the note purchasers and the other holders.
Cross Border Subsidiary Guarantor Supplement,
dated as of October 13, 2017, made by Iron Merger
Co., Inc. in favor of the note purchasers and the other
holders.
Cross Border Subsidiary Guarantor Supplement,
dated as of October 13, 2017, made by IXYS Merger
Co., LLC in favor of the note purchasers and the
other holders.
Note Purchase Agreement, dated November 15,
2017, among Littelfuse, Inc. and note purchasers
listed on the signature pages thereto.
Form of 3.78% Senior Note, Series B, due February
15, 2030.
Form of 3.48% Senior Note, Series A, due February
15, 2025,
Subsidiary Guaranty Agreement, dated as of January
16, 2018, made by LFUS LLC, Littelfuse
Commercial Vehicle, LLC, Iron Merger Co., Inc.,
IXYS Merger Co., LLC and SymCom, Inc. in favor
of the note purchasers and the other holders.
Seventh Amended and Restated Employment
Agreement, dated as of August 25, 2017, by and
between IXYS Corporation and Nathan Zommer. ++
Littelfuse, Inc. Executive Severance Policy. ++
84
10.59
10.60
10.61
10.62
10.63
10.64
10.65
10.66
10.67
10.68
10.69
10.70
10.71
Incorporated by Reference Herein
Form
8-K
Exhibit Filing Date
08/14/2017
10.2
File No.
0-20388
8-K
10.1
10/16/2017
0-20388
8-K
10.2
10/16/2017
0-20388
8-K
10.3
10/16/2017
0-20388
8-K
10.4
10/16/2017
0-20388
8-K
10.5
10/16/2017
0-20388
8-K
10.6
10/16/2017
0-20388
8-K
10.7
10/16/2017
0-20388
8-K
10.8
10/16/2017
0-20388
8-K
10.1
11/15/2017
0-20388
8-K
8-K
8-K
4.2
4.1
11/15/2017
0-20388
11/15/2017
0-20388
10.2
01/18/2018
0-20388
8-K
10.3
01/18/2018
0-20388
8-K
10.4
01/18/2018
0-20388
Exhibit No.
10.72
10.73*
10.74*
10.75*
Description
Form of Tier I Change of Control Agreement.++
First Amendment to Littelfuse Deferred
Compensation Plan for Non-Employee Directors,
effective as of January 1, 2008.++
Second Amendment to the Littelfuse Deferred
Compensation Plan for Non-Employee Directors,
effective as of October 25, 2013.++
First Amendment to the Littelfuse, Inc. 401(K)
Retirement and Savings Plan, effective January 1,
2018.++
10.76*
Altra In-Plan Roth Rollover Amendment to the
10.77*
10.78
10.79
10.80
10.81
10.82
10.83
10.84
10.85
10.86
10.87
10.88
10.89
10.90
Littelfuse, Inc. 401(K) Retirement and Savings Plan,
effective as of February 1, 2018.++
Summary of Non-Employee Director
Compensation.++
Form of Indemnity Agreement by and between
Nathan Zommer and IXYS Corporation,++
IXYS Corporation 1999 Equity Incentive Plan, as
amended.++
IXYS Corporation 2009 Equity Incentive Plan++
IXYS Corporation 2011 Equity Incentive Plan++
IXYS Corporation 2013 Equity Incentive Plan++
IXYS Corporation 2016 Equity Incentive Plan++
Zilog, Inc. 2002 Omnibus Stock Incentive Plan++
Zilog, Inc. 2004 Omnibus Stock Incentive Plan++
Form of Stock Option Agreement for the IXYS
Corporation 1999 Equity Incentive Plan++
Form of Stock Option Agreement for the IXYS
Corporation 1999 Equity Incentive Plan with net
exercise provision.++
Form of Stock Option Agreement for the IXYS
Corporation 1999 Equity Incentive Plan for non-
employee directors++
Notice of Stock Option Grant and Agreement for the
IXYS Corporation 2009 Equity Incentive Plan++
Form of Nonqualified Stock Option Agreement for
Stock Options pursuant to the Zilog, Inc. 2002
Omnibus Stock Incentive Plan++
Incorporated by Reference Herein
Form
8-K
Exhibit Filing Date
01/23/2018
10.1
File No.
0-20388
10-K
10.3
06/12/2008
000-26124
S-8
4.3
01/19/2018
333-221147
S-8
S-8
S-8
S-8
S-8
S-8
10-Q
4.4
4.5
4.6
4.7
4.8
4.9
10.3
01/19/2018
01/19/2018
01/19/2018
01/19/2018
01/19/2018
01/19/2018
11/09/2004
333-221147
333-221147
333-221147
333-221147
333-221147
333-221147
000-26124
10-K
10.23
06/22/2006
000-26124
10-K
10.24
06/22/2006
000-26124
10-Q
10.4
08/10/2009
000-26124
10-K
10.26
06/11/2010
000-26124
85
Incorporated by Reference Herein
Form
10-K
Exhibit Filing Date
06/11/2010
10.28
File No.
000-26124
10-Q
10.2
08/05/2011
000-26124
10-Q
10.6
08/09/2013
000-26124
10-Q
10.1
11/03/2016
000-26124
Exhibit No.
10.91
Description
Form of Nonqualified Stock Option Agreement for
Stock Options pursuant to the Zilog, Inc. 2004
Omnibus Stock Incentive Plan++
10.92
10.93
10.94
21.1*
23.1*
31.1*
31.2*
32.1+++
Notice of Stock Option Grant and Agreement for
IXYS Corporation 2011 Equity Incentive Plan++
Notice of Stock Option Grant and Agreement for
IXYS Corporation 2013 Equity Incentive Plan++
Notice of Stock Option Grant and Agreement for
IXYS Corporation 2016 Equity Incentive Plan++
Subsidiaries.
Consent of Independent Registered Public
Accounting Firm.
Certification of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of the Chief Executive Officer and
Chief Financial Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
XBRL Instance Document.
101.INS*
101.SCH* XBRL Taxonomy Extension Schema Document.
101.CAL* XBRL Taxonomy Extension Calculation Linkbase
Document.
101.LAB* XBRL Taxonomy Extension Label Linkbase
Document.
101.PRE* XBRL Taxonomy Extension Presentation Linkbase
Document.
101.DEF* XBRL Taxonomy Extension Definition Linkbase
Document.
* Filed with this Report.
+ Exhibits and schedules omitted pursuant to Item 601(b)(2) of Regulation S-K. Littelfuse agrees to furnish a supplemental
copy of an omitted exhibit or schedule to the SEC upon request.
++ Management contract or compensatory plan or arrangement.
+++ Furnished with this Report.
86
SECTION 302 CERTIFICATION
I, David W. Heinzmann, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Littelfuse Inc.;
EXHIBIT 31.1
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Dated: February 23, 2018
/s/ DAVID W HEINZMANN
David W. Heinzmann
President and Chief Executive Officer
SECTION 302 CERTIFICATION
I, Meenal A. Sethna, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Littelfuse Inc.;
EXHIBIT 31.2
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Dated: February 23, 2018
/s/ MEENAL A. SETHNA
Meenal A. Sethna
Executive Vice President and
Chief Financial Officer
LITTELFUSE, INC.
EXHIBIT 32.1
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of title 18,
United States Code), each of the undersigned officers of Littelfuse, Inc. (“the Company”) does hereby certify that to his
knowledge:
The Annual Report of the Company on Form 10-K for the fiscal year ended December 30, 2017 (“the Report”) fully complies
with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the
Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ DAVID W. HEINZMANN
David W. Heinzmann
President and Chief Executive
Officer
/s/ MEENAL A. SETHNA
Meenal A. Sethna
Executive Vice President and
Chief Financial Officer
Dated: February 23, 2018
Dated: February 23, 2018
M I C H A E L P. R U T Z
Senior Vice President,
Global Operations
M AT T H E W J . C O L E
Senior Vice President and General
Manager, Industrial Business Unit
I A N H I G H L E Y
Senior Vice President and General
Manager, Semiconductor Products
and Chief Technology Offi cer
D E E PA K N AYA R
Senior Vice President and General
Manager, Electronics Business Unit
EXECUTIVE OFFICERS
DAV I D W. H E I N Z M A N N
President and Chief
Executive Offi cer
M E E N A L A . S E T H N A
Executive Vice President
and Chief Financial Offi cer
R YA N K . S TA F F O R D
Executive Vice President, Chief Legal
and Human Resources Offi cer and
Corporate Secretary
BOARD OF DIRECTORS
T Z A U - J I N C H U N G
Operating Partner
Core Industrial Partners LLC
J O H N E . M A J O R
President
MTSG
C A R Y T. F U
Co-Founder and
Retired Chairman
Benchmark Electronics, Inc.
A N T H O N Y G R I L L O
Founder
Ascribe Opportunities
Management, LLC
DAV I D W. H E I N Z M A N N
President and
Chief Executive Offi cer
Littelfuse, Inc.
G O R D O N H U N T E R
Chairman of the Board
Retired President and
Chief Executive Offi cer
Littelfuse, Inc.
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W I L L I A M P. N O G L OW S
Chairman of the Board
Cabot Microelectronics
Corporation
R O N A L D L . S C H U B E L
Retired Executive Vice President
and President of the Americas Region
Molex Incorporated
D R . N AT H A N Z O M M E R
Founder, former Chairman
and Chief Executive Offi cer
IXYS Corporation
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (“PSLRA”)
The statements contained in the letter to shareholders and the other sections of this report and in the Company’s Annual Report on Form
10-K that are not historical facts are intended to constitute “forward-looking statements” entitled to the safe-harbor provisions of the PSLRA.
These statements may involve risks and uncertainties, including, but not limited to, risks relating to product demand and market acceptance,
economic conditions, the impact of competitive products and pricing, product quality problems or product recalls, capacity and supply
diffi culties or constraints, coal mining exposures reserves, failure of an indemnifi cation for environmental liability, exchange rate fl uctuations,
commodity price fl uctuations, the effect of the company’s accounting policies, labor disputes, restructuring costs in excess of expectations,
pension plan asset returns less than assumed, integration of acquisitions, uncertainties related to political and regulatory changes and other
risks that may be detailed in “Item 1A, Risk Factors” in the Form 10-K and in the Company’s other Securities and Exchange Commission fi lings.
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CORPORATE INFORMATION
A N N U A L M E E T I N G
A N N U A L M E E T I N G
The Annual Meeting of Littelfuse, Inc. will be held at
9:00 a.m. Central Time on April 27, 2018, at the O’Hare
Plaza First Floor Conference Center, 8745 West Higgins
Road, Chicago, IL 60631. Proxy materials and a copy
of this report will be mailed or made available via the
Internet in advance of the meeting to all shareholders
of record as of March 1, 2018.
C O M M O N S T O C K
C O M M O N S T O C K
Littelfuse, Inc. common stock is traded on the NASDAQ®
Global Select Market under the symbol LFUS.
S H A R E H O L D E R I N F O R M AT I O N
S H A R E H O L D E R I N F O R M AT I O N
In addition to annual reports to shareholders, copies of
the Company’s fi lings with the Securities and Exchange
Commission are available on the Investor Relations
section of our website at: investor.littelfuse.com.
I N D E P E N D E N T R E G I S T E R E D
I N D E P E N D E N T R E G I S T E R E D
P U B L I C A C C O U N T I N G F I R M
P U B L I C A C C O U N T I N G F I R M
Grant Thornton LLP
171 N. Clark Street
Suite 200
Chicago, IL 60601
T R A N S F E R A G E N T
T R A N S F E R A G E N T
EQ Shareowner Services
110 Centre Pointe Curve, Suite 101
Mendota Heights, MN 55110
1.800.468.9716
L I T T E L F U S E W O R L D H E A D Q U A R T E R S
L I T T E L F U S E W O R L D H E A D Q U A R T E R S
Littelfuse, Inc.
8755 West Higgins Road
Suite 500
Chicago, IL 60631
+1.773.628.1000
Littelfuse.com
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© 2018 Littelfuse, Inc. | Form: CM105-EN